Trump’s economic agenda missteps don’t deter Wall Street
Despite concerns about President Donald Trump’s ability to push through his market-friendly economic agenda, investors stuck with stocks at the start of the year, propelling Wall Street to its biggest quarterly gain since the last three months of 2015.
The Standard & Poor’s 500 index, a benchmark gauge of large U.S. stocks, gained 5.5 percent in the first three months of this year, its best quarter since the final quarter of 2015 and the best start to a year since a 10 percent gain in 2013.
Stocks continued their post-election rally despite Trump’s setbacks, including the inability of the Republican-controlled Congress in March to pass a new law to replace the Affordable Care Act championed by President Barack Obama. That political loss sparked worries that Trump’s plans to cut corporate taxes, reduce business regulation and get an infrastructure spending plan underway would get delayed or watered down.
Those concerns weighed on segments that would benefit more from Trump’s plans, such as banks and other financial stocks, which declined in March and gained 2.1 percent in the quarter. Gains in Bank of America shares, which had climbed 17 percent for the year in early March, shrank to less than 7 percent by quarter’s end.
Still, many investors say it’s premature to say Trump’s pro-business moves won’t materialize. “The carrot remains tax reform,” says Bruce Bittles, chief investment strategist at Baird.
Wall Street bulls also have been emboldened by signs of a global economic pickup and rising confidence readings for both consumers and businesses, says Joe Quinlan, chief market strategist at U.S. Trust. Market optimists still expect the White House to “produce a signature piece of legislation,” he adds.
Still, Quinlan wouldn’t rule out fresh political obstacles causing problems for stocks. “Political disappointment and dismay could emerge as headwinds in the second quarter,” he says.
Tech stocks are the big winner early in 2017. The industry sector, led by iPhone maker Apple, which jumped 24 percent, rose 12.2 percent — or double the performance of the S&P 500. Tech stocks found buyers as the economy downshifted from a 2.1 percent growth rate in the final three months of 2016 to an estimated 1.4 percent pace in 2017’s first quarter. Tech companies are seen as having the ability to grow their businesses at a rapid clip with or without help from Trump’s hoped-for economic stimulus.
Wall Street will quickly pivot to the next wave of potentially market-moving news when the second quarter kicks off Monday.
“The success of stocks in the second quarter will come down to how earnings come in and whether there’s progress on Trump’s tax plans,” says JJ Kinahan, chief strategist at TD Ameritrade.