Markets fret as Trump agenda shows signs of cracks
The steepest pullback in stocks since the U.S. presidential election reveals investor angst about President Donald Trump's ability to push through major reforms, leaving stocks vulnerable to a long-anticipated correction.
The S&P 500, in its second longest bull market ever, has risen close to 10% since the November 8 election on optimism about president Trump's pro-growth agenda. With valuations at their highest in over a decade, investors have been expecting a pullback even if its catalysts haven't been clear.
Trump, looking to score the first major political win of his presidency, warned Republican lawmakers that if a healthcare bill he backs fails to pass, it would cause “political problems”. Stocks fell alongside the U.S. dollar, while Treasuries and gold rallied.
“It's like the Trump agenda getting kind of slapped in the face,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
Investors saw the health bill vote, expected on Thursday, as testing optimism that the Trump administration and Republican leaders will implement tax cuts, deregulation and infrastructure spending expected to boost economic growth.
The muddled view on the healthcare bill “carries over to what will happen with the infrastructure plan and the tax reform plan and the reduced regulation plan,” Tuz said.
Adding to the angst, FBI Director James Comey on Monday confirmed that the bureau is investigating possible ties between Trump's presidential campaign and Russia as Moscow sought to influence the 2016 U.S. election. The investigation, he said, could last for months.
Comey's testimony “pointed to the fact that there could be a lot of drawn-out political infighting that could delay some of the pro-business ideas from being passed,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
He said he doesn't expect to see a correction unless the S&P 500, currently down about 2 % from the record high set March 1, retreats another 1.5 to 2 % in the next few days.
“That would cause investors to maybe take a pause in what has been a buy-the-dip mentality since the election,” Meckler said.
The S&P forward price to earnings ratio has jumped to above 18 from 16.6 on Election Day, making U.S. equities the most expensive level since 2004. At the same time, the index's dividend yield sits just above 2 %, losing some of its allure against the 10-year Treasury note.
SKITTISH INVESTORS
The S&P 500 has not posted a daily decline of more than 1 percent since October. 11. Tuesday's move in stocks underscores trends in other markets already pricing in a risk that the Trump administration's plans could be delayed.- Nampa/Reuters
Trump, looking to score the first major political win of his presidency, warned Republican lawmakers that if a healthcare bill he backs fails to pass, it would cause “political problems”. Stocks fell alongside the U.S. dollar, while Treasuries and gold rallied.
“It's like the Trump agenda getting kind of slapped in the face,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
Investors saw the health bill vote, expected on Thursday, as testing optimism that the Trump administration and Republican leaders will implement tax cuts, deregulation and infrastructure spending expected to boost economic growth.
The muddled view on the healthcare bill “carries over to what will happen with the infrastructure plan and the tax reform plan and the reduced regulation plan,” Tuz said.
Adding to the angst, FBI Director James Comey on Monday confirmed that the bureau is investigating possible ties between Trump's presidential campaign and Russia as Moscow sought to influence the 2016 U.S. election. The investigation, he said, could last for months.
Comey's testimony “pointed to the fact that there could be a lot of drawn-out political infighting that could delay some of the pro-business ideas from being passed,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
He said he doesn't expect to see a correction unless the S&P 500, currently down about 2 % from the record high set March 1, retreats another 1.5 to 2 % in the next few days.
“That would cause investors to maybe take a pause in what has been a buy-the-dip mentality since the election,” Meckler said.
The S&P forward price to earnings ratio has jumped to above 18 from 16.6 on Election Day, making U.S. equities the most expensive level since 2004. At the same time, the index's dividend yield sits just above 2 %, losing some of its allure against the 10-year Treasury note.
SKITTISH INVESTORS
The S&P 500 has not posted a daily decline of more than 1 percent since October. 11. Tuesday's move in stocks underscores trends in other markets already pricing in a risk that the Trump administration's plans could be delayed.- Nampa/Reuters
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