The Trump rally isn’t real
Ken Fisher column.
One year in and the so-called Trump rally is misunderstood by almost everyone of every political persuasion. Folks are so blinded by ideology and partisancharged positioning that they can’t see this stock market for what it is. Look at the simple facts and you’ll understand why this charging bull likely has room to run, regardless of the president.
While stock market returns in the last
12 months since Trump’s election are clearly positive, they are only the seventh best among modern presidents. (See my attached chart.)
At 21.5%, the Trump bump pales vs. Bill Clinton’s second-term 12-month run of 33.1%. FDR topped Trump twice, in
1932 (30.6%) and 1944 (30.7%). Kennedy also beat the current president, with
27% after his 1960 win. Stocks also partied more after Barack Obama’s 2012 win, rising 24.4%. The 22.2% gain following Bush-I’s win barely edged out Trump. Yet no one talked about the great George H.W. Bush stock market rally!
People always overrate a president’s market impact. I think it’s because politics is so important to us on a personal level. But presidents have less direct influence over the market or the economy than most people envision. They don’t write laws — Congress does that. The mass of U.S. output and all innovation come from the private sector, not the government. Yes, policies can influence markets. So does falling uncertainty over any new president, which can help returns in inaugural years. We’ve had that tailwind with Trump, but may have had it with Hillary Clinton as well. Investors feared her campaign pledges, too. Markets feeling relief when a new president does less than feared isn’t unique to Trump. It’s old and normal.
To truly see that the rise in stocks isn’t a Trump rally, look globally. If the president is so bullish, American stocks should be leading the world, but they aren’t. Of 23 developed nations, U.S. stock market returns rank 17th at 17.6% in 2017. Nice! But not as nice as Austria’s
51.5%, Denmark’s 30.4%, Spain’s 25% or Germany’s 26.8%. America lags scads of developing countries, too. Poland’s 50.9%, China’s 28.4% and India’s
33.2% haven’t anything to do with the president. Is Trump why South Korean stocks are up 45.8%, beating almost everyone? Funny!
Seems to me pundits cooked up the Trump rally to justify a run they never expected and couldn’t fathom.
But this isn’t just trivial quibbling. It’s good for you. Today’s Trump rally narrative says stocks rose because the president promised tax goodies — and if Congress disappoints, the party ends. If you fathom that it’s not a Trump rally, you can fathom stocks rising with or without tax changes. You can also fathom non-U.S. stocks leading big time — and position yourself accordingly.
Remove Trump from the equation, and consider why stocks really rose: improving overseas economies and a global wave of falling political uncertainty.
A year ago, folks feared a Brexit domino effect everywhere. Extremists polled well across Europe. Investors couldn’t see through the fog. As it slowly lifted, though, European stocks zoomed in relief. Italy’s 2018 election should help euro uncertainty fall further.
Asia’s markets are having a relief rally of their own, led by falling uncertainty after the impeachment of South Korea’s president.
Leading economic indexes globally are high and rising. Bank lending is increasing in Britain, Europe and even Japan. U.S. business investment is humming. Asian tigers are roaring. Companies worldwide are exceeding their own expectations and those of investors. Revenues and earnings should continue faster growth than commonly expected.
Whether Trump signs tax reform or dyes his hair purple, global stocks should keep partying, with Europe leading the charge. When foreign stock markets start outperforming, like this year, it usually lasts for two to four years. To enjoy this not-a-Trump-overseas-ride, buy 75% Schwab’s International Equity, (SCHF) and 25% Emerging Market Equity (SCHE), two great, low-cost ETFs that cover the total non-U.S. realm.
Ken Fisher is the founder and executive chairman of Fisher Investments, author of 11 books and is No. 200 on the Forbes 400 list of richest Americans.