Trump “PUMP” – All Bluster ?

Investor’s first read – Daily edge before the open
DJIA: 20,090
S&P 500: 2,293
Nasdaq Comp.:5,674
Russell 2000:1,361
Wednesday, February 8, 2017 9:04 a.m.
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Promises of a tax cut, deregulation and a big spend on the nation’s infrastructure and the military triggered a surge in stock prices over the last three months.
What if that stimulus doesn’t happen soon enough, or in a big way…. or at all ?
Initially the bull market would stall, then slide down to a level that discounts the Street’s disappointment. Right now, the Street expects this stimulus before year-end, though over the weekend Goldman-Sachs expressed doubts on the timing.
Bloomberg.com featured two articles Monday that suggest corporate tax cuts won’t be the bonanza that is expected and deregulation, the dismantling of Dodd-Frank designed to prevent another 2008-2009 meltdown, will take a long time and encounter opposition in Congress as well as be unpopular to voters in many states.
“It’s incredibly difficult to be optimistic about any legislation given the political dynamics around Wall Street regulation….any changes will be slow and limited,” said Issac Boltansky, a financial regulation analyst at Compass Point Research & Trading.
Oliver Ireland, partner for the law firm of Morrison & Foerster, agrees, saying, “This is not a short-term issue… It’s going to take a long time to work some of these things out.”*
Regardless of whether the cut in corporate taxes to 15% or 20% from 35%, companies won’t reap a windfall with estimates ranging from an increase in S&P 500 earnings of 3% to 6%.
There is more than $1 trillion overseas that may be repatriated at lower tax rates. Hopefully, a decent portion of it would be used for capital spending rather than stock buybacks. The 2009 – 2016 bull market was powered by buybacks, a clear benefit to a company’s bottom line as it reduces shares outstanding, but of little help to an economic recovery.
Bank of America estimates that if only half of the repatriated money is used for buybacks, it would give S&P 500 earnings a one-time boost of $4 (3%).
Trump “pump” all bluster ? Time will tell and the stock market will be the messenger.
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SUPPORT “today”: DJIA:20.039; S&P 500:2,287; Nasdaq Comp.:5,659
RESISTANCE “today”:DJIA:20,137;S&P 500:2,298 ;Nasdaq Comp.:5,686
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ISSUES TO CONSIDER
– the prospect of big corporate tax cuts, deregulation, a big spend on the military and the infrastructure and the restructuring of long-standing trade agreements.
-the uncertainties of the repeal of Obamacare
-talk of privatization of Medicare and Social Security
-possible undermining of NATO and the European Union
-a trade war of sorts.
-lifting of sanctions on Russia for its incursion in the Crimea and actions in Syria, adding to questions already breached.
-continued internal polarization of America and the possible extension of such to other countries.
-intense economic stimulation by the Trump/Republican Congress stands to trigger a rebound of inflationary pressures forcing the Fed to bump interest rates sooner than expected.
-an increasing erosion of investor confidence in President Trump
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POLITICAL/STOCK MARKET
I have never seen, or imagined, anything as bizarre as the behavior of this administration in more than 60 years of voting. IMHO, the Trump presidency is a BIG mistake, and when you make big mistakes, you pay a big price.
Narcissist : People who are excessively vain, paranoid, egotistic, selfish, stubborn, manipulative, boastful, incapable of criticism or resistance, ruthless, feel superior, defensive, shameless, arrogant, entitled, remorseless, abusive, vindictive, untruthful, and deny reality. It is estimated that 1% of all people have this personality disorder, and unfortunately America has one of those for its president.
He is a human wrecking ball and will further divide America at a time it needs to be united – that’s UN-AMERICAN !
It’s time for Americans to step up and say, “ENOUGH !” Trump has a disapproval rating in excess of 53% and that has to include people who voted for him.
Unchecked, Trump will set the United States back a hundred years. Not only will he instigate the dismantling of the European Community, but possibly but possibly the same for NATO.
At some point his plundering ego will adversely impact the stock market. If the BIG money gets spooked, that will happen soon and the correction will be swift and severe.
If the BIG money hangs tough, the market has a lot further to go.
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Corporate earnings (update)
Factset now sees Q4 earnings for the S&P 500 up 3.4% vs. a Dec.31 est. of 3.0%.. Earnings for 2017 are expected to increase 11.4%. Currently, the P/E based on earnings 12 months out is 16.9 x, which compares with a 10-year average P/E of 14.4 and a 5-year P/E of 15.1.
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MY TECHNICAL ANALYSIS of the 30 DJIA Companies: (UPDATE)
On occasion, I technically analyze each of the 30 DJIA stocks for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the new DJIA “divisor” (0.14602) to get the DJIA for those levels. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages.
As of January 27, 2017, a reasonable risk is 20,013 a more extreme risk is 19,947 Near-term upside potential is 20,288.
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 STATUS OF MARKET: bullish
 OPPORTUNITY: RISK: Selective opportunity ! Risk is reality at some point
 CASH RESERVE: 25% – 35%.
 KEY FACTORS: Speculative fever driven by expectations of tax cuts, lifting of regs., and lots of money dumped on economy.
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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
*Trump’s Dodd-Frank Do-Over Diverted to Slow Lane With Obamacare, Steven T. Dennis and Elizabeth Dexheimer (2/7/2017) and “Trump’s Dodd-Frank Do-Over Diverted to Slow Lane With Obamacare.
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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer. Neither Game-On Analysis, LLC, nor George Brooks is registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

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