You’ve been watching the markets, and you have your concerns. The last thing any of us want is a return to the Obama economy. Trump’s naysayers have many words on the topic, but they are carefully avoiding some important facts. The first quarter is over, and the early earnings reports tell us more about the economy than the short-term rise and fall of the stock markets.
The Stock Slump
March has been disappointing in the wake of record growth since Trump’s election. Before you give into the doom-saying predictions of the anti-Trump regime, consider a few important things. The March slump has still left all of the major indexes very near record highs, so market values are not slipping.
What we have seen is a plateau of sorts. To put it in context, Trump’s economy started so impressively that the typical early spring slowdown is surprising. The markets are still outperforming the entire Obama Era.
It’s also important to understand why the slump has happened. Investor confidence was largely based on Trump’s campaign promises, and Congress failed their first chance to reward that confidence. Obamacare reform was the first opportunity for the government to put significant money back into the economy, and that didn’t happen. Despite the letdown, there has been little to no backlash.
Trump’s critics will take the market slump as a chance for a huge “I told you so,” even though the economy is performing in exact opposition to their predictions. Even as market shares have slowed, first quarter earnings reveal a deeper strength to the economy.
The final reports will take time to compile, but at the close of the first quarter of 2017, earnings are impressive. Early indicators suggest a 10.4-percent increase over the first quarter last year, and they are showing the fastest acceleration in over 6 years. Moreover, growth continued to accelerate in March, even while share values stagnated.
The earnings growth largely rode on the success of tech and financial industries. We can learn a few things from this. For starters, energy (namely oil) volatility has had no negative impact on the overall economy. Showing gains in the face of oils unpredictability is an indicator of deep-seated economic strength.
A second major player is health care. The uncertainty that loomed over the Obamacare vote in Congress pushed much of the sector into a conservative mindset. Once again, the impressive performance of the quarter with such a significant industry downplaying their role shows just how robust the current economy.
The good news from earnings reports is more than just a sigh of relief. It provides a new avenue of confidence to investors. We’re entering the part of the year where Congress will largely be debating and doing little. While this could slow growth by delaying reprieve from taxes, regulation and other revenue killers, we now have non-political justification for investing.
Having anything to discuss other than the health vote is already a good start, and now strong earnings can carry the mantle of confidence while Trump works to reign in Congress.
Many political changes still present opportunities for additional booms. Even a mediocre tax reform bill will put billions back into the economy. Moderate fixes to the federal budget and a clear notion of federal spending will also shape confidence and create opportunity.
If Congress can avoid being the worst version of itself, Trump can easily supplement the growth we’re already seeing, and government support will create a feedback loop of success with an already strong economy.
There’s still a lot up in the air. For a savvy investor to get the most out of the coming year, you’ll need to stay sharp and keep wind of which sectors are getting the most attention from the government. Changes to internet security and net neutrality can have positive and negative impacts on different parts of the tech sector. Health care will remain stable until Congress takes another crack, and that is months away at least.
All of this is still ignoring the impending infrastructure boom. Of everything that will inevitably be muddled by Congress, this is the one area where you can expect the most bipartisan support. Spending on infrastructure is inevitable, so be ready to jump on the construction bandwagon as soon as we have a clear idea of the early numbers.
To wrap it all up, politics is still messy, even with Trump at the helm. We knew it would be from the start, but despite Congress’s failure, the economy is still showing strength we haven’t seen in a decade or more.
Despite the positive impact Trump is already having on the economy, markets will still see some levels of volatility. Don’t allow that to distract you from the big picture, else you’ll miss the best opportunities to benefit from this economy.
~ Liberty Planet