Trump Bubble

[TexasHusker]

Is anyone getting out of the stock market, or changing asset allocation, or otherwise making changes to their investment portfolio until after the inevitable "Trump Bubble Burst"?

I haven't yet, but I'm wondering if I should.

Presidents don't cause bubbles. The equities markets overall are frothy in my personal opinion, but I don't see anything going parabolic yet which signals a bubble.

[msomnipotent]

I thought the Trump bubble was specific to stocks that would benefit from Republicans in the House, like oil, financials, infrastructure, etc. I'm kicking myself since I didn't sell the rest of my shares of KMI when I had a 30% profit. Oh well, I can wait a few more years.

[disneysteve]

Presidents don't cause bubbles.

I don't think it was a bubble as much as a rally.

The markets don't like uncertainty. Presidential elections introduce a great deal of uncertainty until they are over.

[greenskeeper]

I don't think it was a bubble as much as a rally.

The markets don't like uncertainty. Presidential elections introduce a great deal of uncertainty until they are over.

The first tip-off that TRUMP was going to win the election was when the stock futures started to go down....wall street doesn't like change, although this looks like change for the better and then some.

[Singuy]

If the house starts an impeachment process for Trump, expect a market correction..which will be the ultimate buying opportunity since I think the rally is more "republican agenda" related than Trump himself. I expect a quick rebound as Pence is sworn in...since corp tax reform and deregulation will still be on the table....just maybe not coal jobs..because no one cares about this dying energy as strongly as Trump..lol.

[TexasHusker]

If the house starts an impeachment process for Trump, expect a market correction..which will be the ultimate buying opportunity since I think the rally is more "republican agenda" related than Trump himself. I expect a quick rebound as Pence is sworn in...since corp tax reform and deregulation will still be on the table....just maybe not coal jobs..because no one cares about this dying energy as strongly as Trump..lol.

So if I'm understanding you correctly, you feel that the bull equities market has a long ways to run yet? If so, corporate profits are going to have move upwards, as the S&P is currently trading at 25 times earnings. That is VERY high, considering the mean P/E since the late 1800s is around 15 times earnings.

If the equities market adjusts back to mean in terms of the P/E, which it most certainly will and even go below it from time to time (severe bear market), that is a massive correction, taking us back to 12,000 to 13,000. Think that sounds ridiculous? That would be a P/E multiple of 15 with today's earnings - just about mean!

Markets don't go up just because they go up. In the end, the price of a stock is usually correlated directly to net operating income (profit), or the hope thereof. That is the underpinning of the averages. As long as earnings hold up, the underpinning is intact. But trading at 25 times earnings, there is a lot of HOPE of significantly greater profits already baked in.

I see very limited upside potential, yet a lot of downside, just looking at the current P/E ratio of 25. That's an insanely high multiple, and the equities markets have traded in that range only for fleeting periods of time since the late 1800s. How much longer can it hold? Is 25 times earnings the new normal? I think I will go with 120 years of trading statistics and bet NOT.

Now if earnings keep growing it isn't an issue. That's the question. But we are moving into an interest-rate normalizing situation (where interest rates are adjusting upward from years of artificially low levels) by the Federal Reserve. Rising interest rates normally do not translate into HIGHER profits. In fact the opposite is true.

[Singuy]

It will be a bull market as long as interest rate is at a historic low....where else will anyone put their money for a high return?...Gold and bitcoins? Not everyone is going to go out and buy a house so they can rent it...

When CDs and bonds are giving out 5% again, that's when I'll start worrying since there will be alternatives.

Market is expensive right now..houses are expensive right now..everything is expensive right now..it's called the "Everything bubble"...lol. Ride the wave until something burst when the Fed decides to crash the economy by taking away QE and increase rates to a point where there's another alternative.

[TexasHusker]

It will be a bull market as long as interest rate is at a historic low....where else will anyone put their money for a high return?...Gold and bitcoins? Not everyone is going to go out and buy a house so they can rent it...

When CDs and bonds are giving out 5% again, that's when I'll start worrying since there will be alternatives.

Market is expensive right now..houses are expensive right now..everything is expensive right now..it's called the "Everything bubble"...lol. Ride the wave until something burst when the Fed decides to crash the economy by taking away QE and increase rates to a point where there's another alternative.

Agree on all. The normalizing of interest rates (the opposite of QE) was/is the boogie man. The Fed can't keep the overnight rate at zero forever.

[LivingAlmostLarge]

No idea. I'm so boring now we just put money into boring index funds and I haven't looked at it since.

[james.hendrickson]

Moved this thread to the "everything else finance" forum.

[TexasHusker]

Moved this thread to the "everything else finance" forum.

Bold move. We desperately needed some brave soul to step up to the plate and get it vacated so that it wouldn't jeopardize further brain matter atrophy.

Might think about moving the rest of the threads over here, too. Except keep the financial loophole and lego appraiser threads right where there are, since they are such gems.

[clatoden99]

The market knows that all of these things will fail because most investors and institutions are actually smart, they know that Donald is a moron that gets nothing done and it's very well reflected in the EUR/USD chart, however, the economy is doing pretty well, the EU is picking up the pace again and things actually look kinda good which can be attributed to the strong economical recovery since the financial crisis, right now there's no real trigger on the horizon that could cause a massive sell off.

[NicolasR]

No. Nothing has changed for me. Market is an unpredictable thing and you have risk any way if you are an investor.