It may not bode well for the US President Donald Trump to stake claim on this year’s bull run in the US equity markets, as the rally is partly fueled by other fundamental factors which have got little to do with him. Besides, it might become difficult for him to avoid criticism if the markets take a plunge, as experts are predicting a correction.
Donald Trump recently tweeted, “Business is looking better than ever with business enthusiasm at record levels. Stock Market at an all-time high. That doesn’t just happen!” In the month of July alone, Donald Trump had tweeted at least six times about the performance of the stock market. After the US stock market benchmark hit record highs on 15 July, Donald Trump tweeted, “Stock Market hit another all-time high yesterday — despite the Russian hoax story!” The President had also retweeted a Fox News graphic showing how much stocks soared.
Experts say that by far the biggest reason for the prolonged rally, in spite of lukewarm GDP growth and sky-high valuations, is continuing money-printing by not just the US Federal Reserve but by all central banks across the globe. “The stock market is very expensive but doesn’t go down, because the bond market is even more expensive. Valuations are very high because bond yields are low. That’s the effect of central banks printing $200 billion per month in a period where there is no crisis,” economist and author Daniel Lacalle said recently. These fundamental factors have got little to do with Donald Trump.
Avi Gilburt, a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, believes that a decline in the US stock markets is likely to begin soon. Avi Gilburt says technical indicators point that the US stocks are soon approaching a correction, and the investors might want to be more cautious. He points out that a main segment of the stock market rally which began February 2016 may be approaching an end. “Once this top is struck, I expect a healthy pullback, which will set up the next rally phase, likely taking us up toward the 2,600 region into 2018,” Avi Gilburt wrote in a recent post.
Market veterans in the United States believe that it might be risky for Donald Trump to take such ownership of the market rally, as every president over the past 70 years has eventually encountered a stock market storm. Speaking to CNN Money, Sam Stovall, chief investment strategist at CFRA Research, recently said, “It’s very rare to have the President make comments like that.”
Experts caution that the current upswing on the Wall Street can’t last forever. Donald Trump will be better off by staying away from cheering the fickle market, as he may come under severe criticism if the markets correct.