January 23, 2017

Since the financial meltdown in 2008-09, we’ve been engaged in one of the biggest bull markets in history.

To me, a market snapshot of that period would show overvalued companies and overbearing regulation. It’s almost like pessimism fueled eight years of growth!

President Trump is expected to enact pro-growth policies, but it could actually result in the market going down. While it’s true the market generally does better under Democrats than Republicans, that’s often because pro-growth strategies take time to realize results. Similarly, Democrats often appoint dove-ish Federal Reserve governors who craft “easy money” monetary policies.

There are two openings for Trump appointments, and no matter whom he selects, they will be more fiscally hawk-ish than their predecessors.

What does that mean? It likely means higher interest rates. That’s great for savers and retirees. But it won’t generate the stock market returns of the recent past. Ironically, the low rates that opened the funding floodgates under President Obama made have kept inequality high, when they were meant to even the playing field.

Equally as ironic is the fact that President Trump will be viewed as friendly towards the rich, when higher rates during his term will likely hurt stocks and bonds while helping middle-class savers. Plus, inequality may decline as well.