Be Prepared for Surprises: America's Next 100 Days
President Trump’s aggressive "First 100 Days" agenda includes: repealing Obamacare, rolling back regulations, controlling the border, cutting taxes, re-balancing trade, “draining the swamp,” and increasing infrastructure spending. He’s doing what he promised so fast that our heads are spinning.
Mr. Trump’s pledge to “Make America Great Again” has both political implications and economic ramifications. I expect dramatic swings in investor confidence, dollar valuation, consumer prices, and institutional lending, as well as international tension.
In his first days, Trump has hurried to make major policy changes he thinks are needed to get the U.S. economy growing again. Last month we witnessed a frenzy over the Dow topping 20,000. But what will February bring? Before “irrational exuberance” takes over, consider these factors:
In the Dow's 120-year history it took 103 years to reach 10,000. It took only another 17 years to double to 20,000. Since November 9, 2016, nearly $2 trillion of “wealth” was created on paper based upon future expectations, without any measurable new economic growth.
Yes, stock price growth can be an indicator of anticipated future growth; however, news headlines and market direction can change dramatically overnight, evidenced by the dramatic backlash and stock sell-off following Trump’s 90-day U.S. restrictions on immigrant travel.
Second, keep in mind that only about half of American households have benefited from a rising stock market. Why? Because roughly only half of Americans now have stock investments.
The Dow at 20,000 mostly benefits top-tier stock investors and Wall Street aficionados - not middle-class Americans still struggling to recover from the weakest period of job and wage growth in over a decade.
Third, when compared to the price of international money (gold), "record" high stock prices could be considered a mirage. Since 1999, the Dow has doubled from 10,000 to 20,000, but gold prices have risen nearly fivefold, from $260/oz. to about $1,200/oz. So far this year, stocks are even and trending downward, while gold prices are up over 5% and trending upward. Make sure the trend is your friend.
I believe most Americans hope Mr. Trump’s new initiatives will boost job growth, reduce taxes and stimulate the economy. But in 2017, it's wise to hedge against the unexpected. Financial markets do not forgive debt or mistakes. Mispriced markets ultimately correct - regardless of who is in the White House.
Swiss America has just released a free special report, America’s Next 100 Days and Your Money which will help you evaluate how Mr. Trump’s policy changes may impact your savings and investments in 2017, available free to CBN.com readers.