The Trump Trade hit again on Friday when the White House announced that Trumps’ proposed tax reform is coming in the next few weeks.
The markets took the new to ramp to new all-time highs.
I’m not buying the hype.
First and foremost, Trumps’ policies, (if implemented, which at best is a 50/50 chance right now) will at the earliest impact the economy 12 months.
Stocks are meant to discount the future, but discounting a proposed tax reform that may or may not be implemented and would at best begin to impact the economy 12 months from now? That’s a stretch.
Secondly, markets are living environments and do not trade based on rationality or reason. They react to sentiment first.
With that in mind, from what I can tell, there are NO BEARS LEFT ANYWHERE IN THE STOCK MARKET.
1.The latest Investors Intelligence survey hit a two-year high this week with 60.6% of investment advisors making bullish recommendations. In fact, it's nearing a 20-year high.
2.Bank of America Merrill Lynch's latest fund manager survey shows investors expectations for better global economic growth just rose to a two-year high. Furthermore, there was a big jump this week in the percent of investors expecting corporate earnings to rise 10% or more this year. It was the most bullish reading since June 2014.
3.E*Trade's recent survey of investors with at least $10,000 in an online brokerage account showed 65% of survey respondents are bullish, the highest since early 2015.
4.Fidelity tells CNNMoney that bullish sentiment among its 17 million brokerage accounts is high. There have been about 30% more buys than sells of stocks this week.
Source: CNN Money
So… basically, fund managers, individual investors (everyone on the investing planet) are more bullish than in years, expecting an economic utopia to arrive.
This is the kind of lopsided environment in which smart traders can make a killing. No matter how much of an impact Trump's policies may or may not have on the economy, markets need new buyers to continue to move higher.
And there is a serious shortage of buyers right now.
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