In a February 17, 2017, interview with Wall Street Week, Steve Kroll and Shelley Bergman talked about the recent rally in the markets. Kroll is the managing director of Monness, Crespi, Hardt & Co., and Bergman is the managing director of Morgan Stanley Wealth Management.
They shared their views on the recent surge in the market and expected corrections. They talked about the impact of improved economic activity in the United States and its effects on bonds, currencies, stocks, and other developed markets.
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Major US indexes (SPY) (VOO) are still rallying since the US elections on November 8, 2016. Currently, they’re at an all-time high. As of February 21, 2017, the S&P 500 Index (SPX-INDEX) has risen about 10.6% since election day. The rise is probably due to the expectation of tax cuts, regulation reforms, and increased infrastructure spending.
The S&P 500 (SPX-INDEX) reported large gains, and about 20.0% of the stocks hit 52-week highs as of February 21. The Dow Jones Industrial Average (DJIA-INDEX) has risen 13.0% since the elections.
According to Bergman, consumer sentiment is driving the markets. Investors who have been on the sidelines have started investing to take advantage of the rally. President Donald Trump’s policies are heating up the markets as his administration announces policy decisions.
As of December 2016, consumer sentiment had risen to 98.2, beating the expectation of 98. It was also higher than November’s level of 93.8. Consumer confidence is currently at an all-time high for the last 13 years. Many people in the United States are expecting Trump to deliver on his campaign promises, and they’re thus feeling positive about the economy, the labor markets, and wages.
In January 2017, the University of Michigan Consumer Sentiment Index rose to 98.5. The rise was due to consumer optimism about the economic outlook and job prospects, backed by high expectations for Trump’s policy changes.
Many investors are upbeat about Trump’s policy plans, including tax and regulation reforms and infrastructure spending. Consumers expect these policy decisions to boost domestic growth and thus provide relief for jobs and wage prospects. However, Trump’s foreign policies and trade decisions are getting a mixed response. Repercussions from a possible trade war with China and the repeal of the Affordable Care Act, commonly known as Obamacare, are unknown and could impact consumer confidence.
Let’s look next at the performance of the US dollar in the midst of strong economic activity.