Before half our audience becomes enraged, I want to point out that this blog post is about Trump’s effect on the stock market. This isn’t a political statement but a statement of cause and effect. For the past five years we have argued that this economic cycle was being prolonged due to the trauma of the Great Recession. The classic four wave bull market cycle of despair, disbelief, acceptance and euphoria which typically plays out over a period of about five years has now lasted ten years. Each of these four cycles has persisted much longer than would typically be the case. Clearly this fact is not solely due to the Trump Presidency. What Trump has done, however, is to moderate the natural tendencies of the markets to overheat.
At several points in the past two years we’ve been in danger of succumbing to the more extreme investor emotions. This sentiment was quickly blunted, however, by the administrations’ trade battles, affinity with the business community, or political strife. One of the unintended consequences of the President’s willingness to take on large trading partners has been to keep investors and business leaders in a constant state of disequilibrium. This unsettled state has served to prolong the cycle. Just when signs of overheating become apparent, a new political crisis appears and confidence wains; and we begin the cycle anew.
This constant drum beat of unease has served to check the extreme emotions typically associated with bull markets. If the stock market climbs a wall of worry, this administration has given the market plenty of worry to climb.