Wednesday, January 4, 2017

Dow End of Year – 19763 – Trump Bump

The driving force for much of the recovery from the 2008 Great Recession was low interest rates. Most recently, starting about mid-year and accelerating in November, oil prices have moved more securely above $50 per barrel due to the OPEC (plus Russian and other non-OPEC producers) cutback of about 1.8 million barrels a day.

But the Trump bump of 1400 points since the election is mostly a reflection of investor optimism about:
  • Lower taxes
  • Less regulation
  • Fiscal stimulus
Compared to the approach to January 2016, today there is more confidence the American recovery will continue and China will manage its slow-down without a crisis. It contrasts with the 1000-point Dow drop in 5 days in January, culminating in the year’s low of 15660 on February 11. Crude oil was $26 at that point. It’s been a 16.5 percent climb, or 2160 points (17603 start).

But the last week of the year the Trump rally stalled. The index shed more than 200 points from December 22. The dark cloud in 2017 will be additional Federal Revenue interest rate hikes, return of wage inflation and more polarizing domestic political conflict.

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