Homepage / Investment / Trump's market cheerleading tweets could end up fueling a bubble
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Investment

Trump's market cheerleading tweets could end up fueling a bubble

Financial markets have endured many bubbles over the centuries, from tulip mania in the 17th century to the dotcom bubble and, most famously, the real estate bubble that nearly capsized the global economy a decade ago.

But the Presidential Twitter Bubble?

No one in his position has ever talked up the stock market as much as Donald Trump, and it’s worth considering, with the president nearing the anniversary of his first year in office, whether the Oval Office cheerleading is contributing to a historically relentless boom on Wall Street.

“A president can create an environment that is business friendly and talk about it. What we saw was he talked about it and it did come to fruition,” said Quincy Krosby, chief market strategist at Prudential Financial. “The president has been explicitly clear about what he wanted to achieve: deregulation, tax cuts and an environment that is friendly to business. That is a key ingredient for markets.”

The question for investors is when it goes too far.

Stocks have been on a relentless tear since Trump won the presidency in November 2016. The Dow Jones industrial average, a popular if narrow measure of market performance, is up about 43 percent and has continued to knock down records on a regular basis.

The problem with such rallies — Wall Streeters are cautious about using the term “bubble” until, of course, the bubble pops — is that they’re lots of fun when on the way up and terrifying when they head in the other direction.

“The higher a market goes without a meaningful pullback, the deeper the fall it finally does happen. Something will come along to pierce this market’s enthusiasm,” Krosby said. “If you’re going to live by the stock market moving higher, you also have to be prepared to suffer the wrath when the market does pull back.”

Despite the hazards that betting on a constantly rising market inherently entails, Trump has continued to pump up the market as a key measure of economic performance during his administration.

The president last tweeted about stocks on Jan. 13, boasting of a “big day” as the market hit yet another new high.

Making the gains all the more stunning is that they come amid ever-escalating tensions on Capitol Hill that could yet lead to a government shutdown. That’s aside from worries about nuclear war with North Korea, a hot-again battle over immigration, and as Trump faces a moribund approval rating that has been inversely correlated to economic growth and the stock rally.

“We’ve never seen a market that has been so divorced from the chaos and ongoing circus in Washington, so laser-focused on what’s fundamentally better,” said Art Hogan, chief market strategist at B. Riley FBR. “A strong fundamental backdrop seems to have taken the front burner and everything that in another place and time would have adversely affected us gets pushed to the back burner.”

So if it’s true that fundamentals are behind the market’s willingness to discard headline risk, the argument that Trump is adding hot air to a bubble loses some steam. Unless …

“At some point in time that won’t be the case,” Hogan said. “When that does happen, it’s something that’s not fundamental and can’t be modeled, like leaving Nafta or tweeting our way into a trade war.”

Short of that, the market’s willing to ride out the political warfare in Washington and watch Trump’s tweets with an amusement foreign to much of the outside world, where pitched battles over the president’s indelicate speech flood the airwaves on a daily basis.

In fact, investors have shown considerable willingness to tolerate and even thrive under political chaos over the years. The Philadelphia Fed even tracks partisan conflict on an index. The chart below shows an overlay of the index — spikes represent heightened tension — with the performance of the S&P 500.

“Gridlock-is-good at times helps to explain why partisan conflict has not been a negative for the market,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “There’s just such a momentum force in the markets now that participants are willing to look past all the concerns that are out there.”

Those who worry the market is in a bubble cite a number of factors, in particular elevated valuation, generational highs in sentiment and the flood of money pouring into stock-based funds.

One of those concerns as well is that the president himself, despite being the market’s biggest cheerleader, could also be its downfall should one of his rants go awry.

“We would never attempt to say what we think ultimately will be the catalyst. Fill in the blank: A tweet that goes beyond the bizarre bounds we already have experienced? Who knows?” Sonders said. “It’s hard to judge which one of these things, or a collection of things, becomes a trigger.”

“What always happens is at some point we do get some trigger or catalyst for a selloff in the market,” she added. “You look back and say, ‘How did we not figure out that was coming?'”

WATCH: Trump’s action on trade is one of the key issues the market will be watching.

Source: Investment Cnbc
Trump's market cheerleading tweets could end up fueling a bubble

Comments are closed.