Since President Trump’s election, investor enthusiasm has helped to propel equity returns into new territory – with gains during his first month in office that have not been seen since LBJ took office. The prospect of major infrastructure spending, coupled with corporate tax reductions and the repeal of regulations imposed during the Obama era have caused a wave of optimism, especially in the industrial and financial sectors. The Fed’s decision to raise interest rates was an additional plus – especially as the increases are to be made in gradual, modest increments to avoid jeopardizing the ongoing economic surge.
As always, when bubbling optimism surfaces it is usually wise to dig a little deeper because reality is always more complicated. Enthusiasm has waned somewhat following the President’s failed effort to repeal the Affordable Care Act in March, which demonstrated that radical overhaul and change doesn’t happen overnight – especially in D.C. The end of April saw the markets pull back as analysts reacted to the President’s tax plans –traders’ initial enthusiasm was dented by concerns over the lack of detail in the corporate tax cut proposals. Some suggest the market may have jumped the gun with such a big post-election run-up. Analysts and individual investors, too, are wondering about the timetable for Trump’s corporate tax reform and deregulation efforts, noting that healthcare reform did not happen as the Administration had hoped.
The banking sector – an industry tipped to be a major winner in the dismantling of regulations – has been the focus of many analysts’ predictions. Here’s what Wall Street gurus currently are saying about the prospects for financial stocks.
Overall, the outlook for banking is fairly rosy. The U.S. economy is performing well, the Fed seems likely to continue to raise interest rates, and Wall Street will probably benefit as Europe emerges from its prior slump.
As always the above is general commentary and not intended to replace professional counsel from your tax and investment professionals.