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U.S. Stocks Riding Record Highs on Trump Tax Talk

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U.S. stocks set multiple record highs this week, as investors continued to rally behind President Trump’s promise of “phenomenal” tax cuts in the not-too-distant future.

All of Wall Street’s major stock indexes settled at all-time highs on Friday. The S&P 500 Index rose 0.2% to close at 2,351.16, having gained 1.5% during the week. Eight of 11 S&P 500 sectors finished in positive territory, led by a 0.9% gain in telecommunications services and a 0.7% advance in consumer staples. The consumer discretionary sector also added 0.3%, while information technology rose by a similar amount.

The Dow Jones Industrial Average closed at 20,624.05, having added 1.8% over the previous five days. Th technology-heavy Nasdaq Composite climbed 0.4% on Friday and 1.8% during the week to close at 5,838.58.

Markets have been on a tear since February 9, when President Donald Trump pledged “big league” tax cuts in the coming weeks to support American businesses. Earlier this month, the President signed an executive order to begin reviewing the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed into law in 2010 in response to the financial crisis. Dodd-Frank was responsible for creating stricter financial rules regarding bank capitalization, compliance and mortgage lending. It also created multiple bodies councils and curbed excessive risk-taking in the financial markets.[1]

Stocks have surged more than 10% since Trump was elected on November 8. After initial hesitation, investors quickly rallied behind Trump’s pro-growth policies, which include massive tax cuts, deregulation of key industries and up to $1 trillion in fiscal stimulus. To date, Trump has announced his intent to cut taxes and deregulate the financial services industry, but has not elaborated on his trillion-dollar infrastructure plan.

Equity markets proved resilient this week in the face of political turmoil facing the Trump administration over alleged ties to Russia. Trump held a marathon news conference on Thursday, where he criticized the mainstream media of spreading fake news and undermining his administration. Trump’s National Security Adviser Michael Flynn resigned this week after it came to light he had spoken with Russian diplomats about sanctions prior to being appointed.[2] In the United States, it is illegal for private citizens to conduct diplomacy on behalf of the state.

Despite the latest rally, analysts say political uncertainty in Washington will do little to improve stability in the financial markets. Moving forward, investors will be looking for tangible evidence that the Trump administration is following through on its campaign promises.

The New York Stock Exchange will be closed on Monday for President’s Day. Markets will resume trading the following day.

The economic calendar has a light release schedule next week, allowing investors to digest the latest political developments in Washington and elsewhere. With Dutch and French elections fast approaching, investors will become increasingly preoccupied with developments in Europe over the next several weeks. The Dutch general election will take place on March 15, while the first round of France’s presidential vote takes place on April 23.

[1] Gillian B. White (February 3, 2017). “Trump Begins to Chip Away at Banking Regulations.” The Atlantic.

[2] Sam Bourgi (February 17, 2017). “Dow Jones (DJIA) Futures Pare Losses, Gain 1.8% For Week.” Economic Calendar.

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