Wall St faces test in Trump’s first address to Congress

NEW YORK (Reuters) – US President Donald Trump’s planned economic agenda has fanned the flames for Wall Street's record- setting run, but some investors worry that his first major address to Congress next week risks dousing it if his plans look slow to execute or are overly vague.

The benchmark S& P 500 has surged 10 percent since Trump's Nov. 8 election, with optimism running high over the Republican administration's domestic proposals, including plans to reform taxes paid by businesses.

But there have been few specifics so far, and some investors believe Trump may need to provide more than just generalities when he gives his first major presidential address on Tuesday.

"If he comes out next week and there are little or no details other than that it is going to be great, that is going to be a time where we could have the first sort of crack in the armor," said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

Trump has said enough so far to help propel major stock indexes to all-time highs. The Dow Jones Industrial Average this week marked its longest run of consecutive record-high closing prices in 30 years.

With stock valuations expensive, many market participants are bracing for a pullback. The S&P 500 is trading at nearly 18 times forward earnings estimates versus the long-term average of 15 times, according to Thomson

Reuters data. In Tuesday's speech, “the market wants to hear about concrete tax reform plans that have traction either across the Republican base or have the potential to reach across to moderate Democrats,” said Alan Gayle, director of asset allocation with Ridge-Worth Investments in Atlanta.

“If the market begins to doubt Trump’s ability to follow through on his promises, then I would think that we would see a five-percent market correction fairly easily,” Gayle said.

Investors are also watching for hints about timing of Trump's economic plans. US Treasury Secretary Steven Mnuchin on Thursday laid out an ambitious schedule to enact tax relief by August.

“The one thing that could stall this rally would be any sort of indication that we won’t see the bulk of the effects this year,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. “I think that would take some of the air out of the enthusiasm.”

Investors will also be listening for comments about the border adjustment tax being pushed by Congressional Republicans, about which Trump spoke positively in a

Reuters interview on Thursday after having previously sent mixed signals.