Choppy Stock Trading Marks Dawn Of Trump Era

As we enter the very beginning phase of a new government — with Congress and the presidency, obviously, in the Republican corner — the stock market appears a bit indecisive. By the end of the day Friday (Jan. 20), stocks were up modestly, and as of this writing, stocks are down about 20 basis points.

What does this all mean? Probably nothing right now. A day-and-a-half of trading does not a trend make. The inauguration of President Donald Trump this past Friday itself may have engendered some enthusiasm because the transition of power has been finalized. The back-and-forth over the weekend, along with hints from Trump and other corners that trade pacts are going to be rapidly reconsidered, may be making the Street a bit nervous as of Monday (Jan. 23).

Though Trump has said that, as per his inaugural speech, “every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families,” the devil is in the details, with at least a few initial shots across the bow. The new president has just signed an order to withdraw from the Trans-Pacific Partnership, a trade deal that he had promised to scuttle. No doubt markets will focus in the near term on just what will happen with trade in general, as tariffs are in the offing to slow import activity. This leads to questions over what large multinational companies will do in the wake of new playing fields related to trade.

And yet the stock markets are treading euphoric waters, even though they have backed off from record highs. As has been well-reported, the Dow, typically used as shorthand for market sentiment, stands at just below all-time highs. But it just can’t seem to break that 20,000-point threshold. The Los Angeles Times reported that investors may be taking profits. But one wonders: If profits are being taken, then the corollary is that investors (or traders, and the two should not be confused as one and the same) do not see profits worth waiting for on the horizon.

One tell will be earnings season, which is under way, and where companies are giving their first post-Inauguration Day estimations of what may lie ahead for interest rates and consumer demand both here and abroad.

As the Times noted, analysts expect earnings growth to be buoyant in the mid- to high-single-digit percentages, markedly better than the flat earnings growth seen this past year. Could all that enthusiasm have been baked in? Time, as always, will tell.