S&P 500; US Indexes Fundamental Forecast – January 23, 2017

U.S. equity markets finished higher on Friday shortly after Trump’s inauguration speech. There wasn’t much of a reaction to it in either direction. This could mean investors are equally divided between President Trump and Candidate Trump.

In the cash market, the benchmark S&P 500 Index closed at 2271.31, up 7.62 or +0.34%. The blue chip Dow Jones Industrial Average finished at 19827.25, up 94.85 or +0.48% and the tech-based NASDAQ Composite ended the session at 5554.24, up 14.16 or +0.25%.

Trump’s speech took on a protectionist tone with the major theme, America first. It sounded like a campaign speech so there wasn’t much for investors to react to.

Forecast

There are no major economic reports on Monday so investors are likely to continue to react to Trump’s speech while continuing to wait for more details about his economic plans and policies.

Investors usually give a new president the first 100 days to get his house in order, but since the markets rallied so much immediately after the election, I believe his 100 day clock has been ticking for almost 80 days. The mixed results in the stock indexes since before the end of the year may be proof that investors are becoming nervous over his ability to produce what he is promised. The price action also suggests that investors are growing tired of the talk and would like to see action.

I think investors would like to see a more presidential Trump and not the guy who seems to want to take on countries, leaders and corporations. They want to see someone who is demanding but willing to cooperate.

Although the Republicans control Congress, we’ve seen signs recently that they may not be on the same page as the President. So even before he can start talking about what he intends to accomplish, he has to convince investors that they will be working together on the issues of rebuilding the country’s infrastructure, reducing taxes and relaxing regulations in certain sectors.

At this time, the strong economy is probably helping to keep stocks afloat. This is likely to continue if Trump decides to play ball in certain areas. If he decides to go radical and starts to sound less Presidential then he’ll lose the confidence of investors and this will likely sink stocks over the near-term.