You might not think it, but history will be very, very good to President Obama. In this article, we explain why President Obama’s unrealized success will make it very hard for Donald Trump to succeed and meet high expectations. We also take a look at the best ways to prepare for inevitable stock market loss, including whether to own bond ETFs like TLT and high-profile securities such as BAC stock and AAPL stock.
Fact is we never likes Presidents. None has approval ratings in the 80 or 90 percentile. But as the years pass and future Presidents take office, people are able to reflect and feel the effects of a President’s lasting impacts. With Bill Clinton, equity markets were never stronger.
He is remembered for that, among others things. George W. Bush, he followed Clinton’s remarkable run, had to deal with 9/11 and war. The end of his tenure will be forever known as the worst recession since the Great Depression.
With Obama in charge, the Dow Jones has risen 150% and the unemployment rate was cut in half to under 5%. Ultimately, those are the two things that Americans care most about. Those who have a job, want their retirements to grow, and those without a job want to find work (mostly).
Then there are other things like a strong auto market, gas prices under $2.50, and the fact that most with decent credit can get loans with interest rates at or around 4%.
Donald Trump: It all comes tumbling down
With that said, Donald Trump will begin his tenure with almost impossible odds. The Dow Jones is flirting with 20,000. It would have to reach 50,000 for Trump to match Obama over the next eight years! Furthermore, how much lower can the unemployment rate really go?
Sure, Trump’s policy is great for business. In theory, businesses will be able to hire, spend, and pay better wages by not giving so much of their earnings to Washington. And if the big companies like Apple Inc (NASDAQ:AAPL) are able to bring off shore profits back home without losing a third to Uncle Sam, then there are immediately greater incentives for big business to invest in the U.S.
However, the tax code, Obamacare, and issues alike are not solved over night. It is going to take some time. Meanwhile, we face short-term risks in the form of rising interest rates and a Fed who just announced plans to raise rates three more times in 2017 — I’m not even going to talk about BREXIT.
This means the cost to buy a new car, build a home, or even start a business just got more expensive. Not to mention, OPEC’s recent deal to cut production caused oil prices to reach highs we have not seen since last year. Thus, gas prices are going higher too.
What we have is the perfect storm of high investor sentiment reflected in a “Trump (stock market) rally” coupled with real short-term risks and liabilities that target the middle man who Trump’s campaign targeted so successfully.
Given these combined factors, we believe the market could be in for a long, bumpy, and ultimately downhill road in 2017.
If you recall, BNL Finance predicted back in June that the S&P 500 would reach 2,400. We concluded that 2,500 is possible. Importantly, we still think it will happen. Therefore, we think the market will go higher before ultimately tumbling down.
Granted, we do not predict a recession, but definitely think a 10%, possibly 15% pullback is in store, followed by 6-8 months of flat trading. We think it will look a lot like July and August of 2011, and will further explain this theory to BNL Members over the coming weeks.
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