Why this can't be a Trump bull market
Is President Trump good for markets? Or bad?
Fuhgeddaboutit!
Unlike us, markets mostly ignore politicians: The more extreme politicos seem, the more markets ignore them. If you envision President Trump as a stock price friend or foe, you aren’t thinking like markets do. This wasn’t ever a “Trump” rally.
Here’s why:
When very young, my thick skull was pummeled by this reality: Stock, bond, currency and similarly liquid markets digest all widely known information super fast — before we even hear it. In money management, it’s called “pre-pricing.” Widely discussed “information” is already in prices.
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Markets price events faster than journalists write or speak because their sources or their sources’ sources already bought and sold those events into profitless oblivion. An age-old but correct saying is “The market knows.” Even when we don’t.
It doesn't just know facts, figures and data but also opinions, rumors, warnings, fears, cheers and jeers, and, and … Trumpeting. Add even more … it’s a further bore … to markets.
I always ask, “What do I know that others don’t?” Usually nothing! I brace to not act — hard as that often feels. You largely can’t know things others don’t about any POTUS, particularly Trump. For markets, my opinions on him and yours don’t matter. Nor do some TV squawk head’s.
Love or hate him, unless you've stumbled onto something previously unknown, your opinions are market-useless. That "stumbled onto unknown" is virtually impossible under any POTUS.
Yes, it’s called a “Trump rally,” but that doesn’t make it so. I posted a chart of the prior 18 months' market on my Twitter feed (@KennethLFisher) on June 8. From February 2016’s low, it’s been a slightly wiggled, mostly straight upward line. Was it a "Trump rally" 15 months ago when few thought he could be nominated? What about in August when he was envisioned losing? When he won the presidency, most expected plummeting prices. Then stocks wiggled upward as they did in most prior months. For 18 months, I’ve maintained that it’s a falling uncertainty rally.
Markets love falling uncertainty, always. Last year started with “yuge” uncertainty, including memory’s weirdest Republican primary and commodity, oil, Brexit and China fears, along with so much more.
Slowly, one event after another clarified falling uncertainty. The election reduced some uncertainty — and we got the “Trump rally.” The forming of an administration gave us more falling uncertainty. But a similar situation would have evolved had Hillary Clinton won.
This year, we’ve learned Trump can’t do as much as some had hoped and others feared. More clarity and falling uncertainty.
Do tax and regulatory change matter? Sure, in the real world. But we have abundant history of tax hikes and cuts of every type. I’ve studied them endlessly. I’m here to tell you this: Statistically, they imply simply nothing about future market pricing. People disbelieve that, but there is no there there. Why? Again, all this stuff is publicly debated to death and pre-priced long, long before enactment.
Ditto for other babble-licious topics. Interest rate or growth jitters. GDP numbers. Brexit wiggles. Shaky Italian banks. Trumper tantrums. Putin phobia. All priced. Even terrorist attacks — we’ve endured way too many for them to have pricing power.
Reading news is mandatory for many reasons. But when wearing your investing hat, the right reason isn’t for finding information to trade on — but to know what has been pre-priced so you can focus elsewhere.
It’s always a surprise, for good or bad, that moves markets. The surprise we’ve had — which is still ahead of us and which you should focus on — is all the falling uncertainty happening overseas, everywhere, all at once, and how much more remains ahead of us in this great bull market.
Fisher is the founder and executive chairman of Fisher Investments. The author of 11 books, four of which were New York Times best sellers, he is No. 184 on the Forbes 400 list of richest Americans.