inauguration | Billionaire's Portfolio

January 20, 2017, 4:15pm EST

President Trump officially took office today. From the close of business on November 8th, as people across the country were still voting, the S&P 500 has climbed 6% – from election night through today. The dollar index has risen 2.8. The broad commodities index is up 6%. The 10 year Treasury note is down 4% — which means the yield is UP from 1.80% to about 2.50%.

His policy agenda has clearly been a game changer.

But if you recall, the broad sentiment going into the election was that a Trump Presidency would cause a stock market crash. These were people that weren’t calibrating the meaningful shift in sentiment that came from projecting pro-growth policies in a world that has been starved for growth. That event (the election) alone did more to cure the global deflation risk than the trillions of dollars that central banks have been pouring into the global economy.

But many still aren’t buying it. I don’t often read financial news. I’d rather look at the primary sources (the data or hear from the actors themselves/ the horse’s mouth) and interpret for myself. But today, I had a look across the web. Four of the five top headlines on a major financial news site, on inauguration day, ranged from negative to doom-and-gloom — all laying blame on the dangers of Trump.

Because Trump has talked tough on trade, the common threat most refer to is a potential trade war. But remember, Trump has also talked tough on U.S. companies moving jobs overseas. Thus far, he hasn’t created enemies, he’s gotten concessions and has created allies. He’s used leverage, and he’s negotiated win-wins. Expect him to do the same with trade partners. With pro-growth policies coming down the pike and a meaningful pop in U.S. economic growth coming, no country, especially in the current state of the global economy, will want to be locked out of trade with the United States.

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Don’t Expect The Trump Rally To Fade On Inauguration Day

January 17, 2017, 6:00pm EST

As we kick off inauguration week, we have a continuation of this “buy the rumor, sell the fact” trade going on in markets.

We often see this phenomenon–it’s a reflection of investors pricing new information in anticipation of an event, and then selling into the event on the notion that the market has already valued the new information. And as we discussed last week, it looks like we’ve already been working on this “sell the fact” phase. Stocks have stalled, the dollar has pulled back a bit and global interest rates have slid off of the post-election highs. But as I said, these retracements should be shallow and short-lived.

Why? Because we appear to finally be in an environment where optimism (not hope) is outweighing fear. Contrary to the narrative of skepticim coming from the media, the markets, the data and the players are all sending very positive signals on the policy outlook.

The media has warned about the dangers of Trump’s rhetoric. Meanwhile, those that have been most directly targeted haven’t become enemies, they’ve quickly become allies and advocates of the Trump administration, making concessions and buying into the growth outlook. We’ve seen it at the corporate level (from GM to Alibaba). And we’ll likely see it at the sovereign level. The threats of taxes and fines have leveraged jobs with U.S. corporates. Tariffs can leverage better trade deals in a world and time that everyone can greatly benefit from better U.S. growth, which can ultimately lead to better and more sustainable global growth.

On the data front, small business optimism is running at the highest level in 37 years. And, as we’re getting into the heart of earnings seasons, the positive surprises are already coming in bigger and at a hotter pace. That’s for the fourth quarter, with just a sliver of post-election certainty priced in.

Add to that, the most troubled industries through the post-financial crisis period have been energy and financials. Financials now have the tailwind of rising interest rates and an outlook for softer regulation. Energy companies have spent that past couple of years cutting costs and reducing debt in the oil price crash. With oil back above $50 and with good prospects to go higher as they ramp up production, they will become earnings machines. This is all fuel for hotter earnings and higher stocks.

Plus, on the earnings note, people are just beginning to wake up to the fact that a better growth environment and a dramatic cut in the corporate tax rate will pump up broad market earnings next year–perhaps as much as 15%-20% better than what’s already projected for 2017.

With all of this in mind, it’s unlikely that investors will retrench over the coming months and wait for proof that Trump promises will be kept and Trump policies will be executed well. Instead, following the swearing in of the new President on Friday, we’ll probably see the “reflation” rally resume.