U.S. stocks slip as investors brace for Trump’s address to Congress
Wall Street could be in for a rude awakening if President Donald Trump’s pro-business agenda fails to pass muster.
The buoyant market reflects investors’ anticipation for the reforms outlined by Donald Trump on the campaign trail, but Congress will need to turn those promises to cut corporate taxes and slash regulations into actual legislation.
“Much of the rally has been based on expectations of coming fiscal and policy changes — and so far, we’ve been hearing the ‘right’ things being discussed [like] tax reform,” Jennifer Lee, senior economist at BMO Capital Markets, told NBC News. “The slightest change (in the other direction, perhaps) in the wording or the message could cause the market to take a step back.”
Market Overvaluation
Jeremy Glaser, markets editor for Morningstar.com, said the rally has pushed stocks above their value by about 4 percent, on average.
“We really see it being driven by a lot of hope that we’re going to see tax reform, in particular, a rollback of regulation and that there’s going to be some fiscal stimulus coming out of the Trump administration,” he said.
Positive data on metrics like retail sales and inflation have given this rally staying power, said Andy Smith, senior vice president of financial planning at Financial Engines.
“There’s sentiment and then there’s data,” he told NBC News. “When you only have one and not that other, that makes it difficult. But when you have sentiment and economic data that both point in the same direction, that lends more credibility to what we’re seeing.”
To keep the ball rolling, experts say the Trump administration will have to deliver on the President’s campaign-trail promises. Current market trends are baking in the assumption that a unified GOP government will be able to make good on its pledges to corporate America.
“In the past we’ve often seen that things are easier said than done,” Glaser said. “I think that’s one potential risk.”
“I think the Republicans were woefully unprepared for the majorities that they have. Now they’re scrambling to put policies together,” said Mitchell Goldberg, president and CEO of ClientFirst Strategy.
