After correctly predicting Mr. Trump’s Presidential victory as far back as May of 2016, InvestWithAlex Predicts: Donald Trump Will Be The Next President, we are not as optimistic about this post election rally.
After all, the stock market is pricing in a nearly miraculous turn around in the US Economy and earnings growth. And with Shiller’s S&P P/E ratio at the second highest level in history, at 28.10, someone better deliver.
So, can President Trump work miracles?
At least for the time being that appears to be the case. Mainstream media fools are still trying to figure out how his win was even possible, digging their own graves with an amazing onslaught of subsequent fake news reports in the process.
Back to the stock market.
Consider the following. If nearly a decade long experiment in monetary insanity (QE + zero interest rates) has failed to jump start the economy, can President Trump really make a positive impact by potentially starting numerous trade wars in his attempt to bring “jobs back” to America?
Quite a few people believe that to be the case.
For instance, in the latest NFIB survey, small business optimism has surged the most since 1980. SMALL BUSINESS OPTIMISM SKYROCKETED IN DECEMBER
“We haven’t seen numbers like this in a long time,” said NFIB President and CEO Juanita Duggan. “Small business is ready for a breakout, and that can only mean very good things for the U.S. economy.”
Fair enough, but the fundamental problems/imbalances persist. The stock market finds itself in an overvaluation bubble, interest rates have bottomed and rising, and most of the stimulus has already been spent of stock buybacks and the so called economic “growth”.
In other words, we likely saw earnings peak on the S&P two years ago. With S&P forward guidance down 18% from a year ago, most recent P/E expansion does not bode well for the overall stock markets.
Well, unless there is an outright miracle.