New obstacles await U.S. stocks as Dow hits 19,000


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expectations that President-elect Donald Trump and congressional Republicans will enact pro-growth regulatory, tax and investment policies.

AFP gets this one exactly right, IMO.

Other media outlets that failed to predict the correct market reaction to a Trump victory have since been trying to say that markets have gone up because Trump's policies would blow out the federal deficit and generate inflation, but that strikes me as total nonsense.

It's the hope for pro-growth policy that is driving this.

this viewpoint is “more hope than reality.”

And that viewpoint is just a viewpoint itself. If you believe this you should sell now (if you haven't sold already), but if you have already sold you have already lost money. The new Republican government is getting the benefit of the until it disappoints, just as markets believed in the Abenomics structural reform story for a good while before observing that Abe had failed to deliver.

I don't doubt that the Republicans do want to cut corporate taxes, and all else equal that is going to boost profits, and expectations for rising profits can drive stocks higher.

if the Fed starts giving guidance of multiple rate hikes in 2017, that could be viewed as a negative.”

Until they are significantly higher I don't see it as an issue, personally (retail investor that I am). If interest rates are 4.25% and the central bank is hiking you sure might think of selling stocks considering the risks, but if interest rates are even 1.25% I think you're still better off holding stocks and receiving dividends as corporate profits rise.

The rally is betting that Trump will succeed in getting a mix of fiscal stimulus and tax cuts through Congress and that the measures will lead to further growth.

But those are assumptions.

Fiscal stimulus through government spending money might help those favoured sectors in the short term but experience has shown that it fails to produce sustainable growth. On the other hand permanent tax cuts mean permanent increases in pre-tax income by definition. But the article misses the deregulation angle here, which is also critical. In any case it's all a damn sight better than the policy of central bank quantitative easing that the developed nations have been pursuing so haplessly.

“We do not know how much of (Trump’s) fiscal stimulus plan will be approved and secondly when it will start to impact the economy and earnings,” Johnson said.

Fiscal stimulus is all short term anyway. Only short term traders, speculators and fools would be buying based for that reason, IMO. I hope the Republicans keep the ridiculous notion of government knowing what to spend on reined in.

“Fundamentals have not really improved,”

If you let me keep 15 to 20% more of my income, I'd personally say that's a very material improvement in fundamentals.

Finally one has to note that US stocks have risen to all time highs at the same time as the dollar is gaining in strength. In Japan it's opposite, with the currency sinking and stocks rising - the investor ends up standing still in dollar terms. Definitely better to own US stocks in general than Japanese stocks, in my estimation.

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Fxgai,what you say makes sense,and what article mentioned makes sense as well.Its UNCERTAINTY .I do strongly believe Trump is a game changer,he is a businessman and knows what he says,it won't be that easy,but it will indeed be totally different.Whats happening in Eurozone will be-no doubt-in favor of Dollar and US stocks,hard times are waiting for Euro in coming days,I believe soon we will see Euro equal Dollar.we have to take this into consideration,those who are taking history as Aguirre when Fed hikes rate,I would say,this time it's different,it's a beginning of new era and new game rules,Sure stocks record new round high will face obstacles,but this is normal technically when it reaches or records new high,still believe there is a lot good in favor of Dollar and AMerican stocks and markets in the future.

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