In the second week of trading following Donald Trump’s victory in the 2016 U.S. presidential election, stocks rose again.
The S&P 500 rose 0.8% this week after dropping 0.2% to2,181.90 today, while the Dow Jones Industrial Average advanced 0.1% this week after declining 35.89 points, or 0.2%, to 18,867.93. The Nasdaq Composite gained 1.6% this week after falling 0.2% to 5,321.51 today.
BMO Capital Markets strategist Brian Belski looks ahead to 2017:
We believe the S&P 500 has a very good chance of delivering at least high-single-digit percentage gains in 2017 as the market transitions from P/E to EPS-driven gains and copes with the positives and negatives associated with a Trump administration and the changing policy dynamics it generates. That being said, bouts of increased doubt and rhetoric are sure to generate consternation, with volatility representing a constant theme. However, the resiliency of US companies has proven itself time and time again throughout this bull market, and investors should avoid trying to time the market, in our view. Thus, we believe there is no reason to expect that a dramatic reversal in longer-term fundamentals is imminent. Rather, the slope of our long-standing secular bull market call remains positive. Therefore, there is a very good chance that the year of surprises that 2016 represented will likely roll over into 2017. After all, investors have been climbing the wall of worry for eight years and counting. Doubt, fear, and rushes to judgment have been trying to diagnose the end of the bull market since it began. Sound familiar to something else? In other words, chances are the same type of wall of worry applies to President-elect Trump as well, perhaps figuratively and literally.
Deutsche Bank’s David Bianco and team look ahead to 2018:
Trump and stocks: S&P 500 likely to reach 2250 by the inauguration: In the first week of President elect Trump, most of our investor conversations centered on their concerns about a higher fiscal deficit lifting Treasury yields and pressuring PEs and a stronger dollar/ weak oil prices pressuring the EPS outlook and the possibility of protectionism. While we don’t ignore such risks, we think the market is under appreciating the likely big boost to S&P EPS from a lower corporate tax rate and the boost to Bank profits from rising yields (and lower pension expense) and the much higher chance now of a long lasting economic expansion that rivals the 10 year US record. We’re more confident now that the S&P will reach 2500 in 2018 before suffering its next bear market.
At least someone is.