Don’t Count on the Trump Market Rally to Last

05.01.2017 • Politics and War

Kris Sayce – Port Phillip Insider (AUS)

Stocks are up again. But one Sydney fund manager isn’t quite so bullish.

According to Bloomberg:

‘The S&P/ASX 200 Index’s 12 percent surge in just two months has sent the relative-strength indicator to the highest level since August, signalling the rally may have gone too far, too fast. That’s prompting Shaw’s Sydney-based Karl Goody to cash in on gains made since buying in mid-November so he can redeploy money after the pullback he expects in shares.

‘“I’m still pretty cautious,” said Goody, who helps oversee about $A10 billion as a private wealth manager at Shaw. “You’re going to see some profit taking over the next few days, even if it doesn’t become a more sizable sell-down.”’

Reason to worry? Could be. Your editor’s crash alert remains on a high.

We can’t help but feel that the Donald Trump-driven stock market rally is one of the longest episodes of ‘buy the rumour, sell the fact’ in stock market history.

The US S&P 500 index is up nearly 9% since the November low. It’s trading at or around a record high. The market seems convinced that a Trump presidency will result in newfound riches for the American economy.

But what if it doesn’t? What happens on 20 January, on Trump’s first day in the White House? Will the economy magically sparkle?

We’re not convinced. The stock market has rallied in recent months in the expectation of radical things happening under Trump. But once he’s in office, get ready for the big sell-off to begin.

The way we see it, the biggest stock market boom from the Trump presidency has already happened before he takes office. From 20 January onwards, it will be all downhill from there.

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