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Trump is not ending the bull market. this is why

More and more Wall Street business leaders and strategists are expressing concern about what President Donald Trump’s protectionist policies and unpredictable nature could do to markets and the economy.

But we all know that action speaks louder than words. What investors are actually doing is in stark contrast to what people are saying. The Dow, S&P 500 and Nasdaq all hit record highs again on Friday.

And the Russell 2000, an index of small-company stocks that tends to do most of its trading in the US, is now just a few points off the all-time high it hit last December in the wake of market euphoria. of Trump.

What’s more, the IX (IX), a measure of volatility known as Wall Street’s fear gauge, is also down nearly 25% this year. If investors were really scared of Trump, the VIX should be much higher.

And CNNMoney’s Fear & Greed Index, which tracks the VIX and six other measures of investor sentiment, shows signs of greed and isn’t far off Extreme Greed levels.

Of course, it seems like Trump still can’t help but tweet things that, let’s be honest, won’t help the economy at all, even though Nordstrom’s investors are richer despite Trump attacking them for ditching his daughter Ivanka’s brand.

But to give credit where credit is due, it seems the main reason stocks have taken off again lately is because Trump promised to come up with a “phenomenal” tax plan soon.

Related: Rare rare for US stocks: Long stretch without a 1% drop

Trump also recommitted to investing more in infrastructure when he met with airline CEOs on Thursday.

That is what the market wants to hear.

“We still expect fiscal stimulus, lower taxes and less regulation,” said Matt Lockridge, manager of the Westwood Small Cap Value Fund. “Timing is the big question, but it’s coming.”

Lockridge believes that many companies that generate most of their revenue in the United States should benefit if Trump’s stimulus ends up speeding up the economy.

He likes stocks in a variety of industries, such as owning a movie theater. maco (PLUS)snack company J&J (JJSF) and aerospace equipment company Arrived (KAMN).

Another money manager said he also remains bullish on small US stocks that could get a boost from Trump’s policies.

Related: Wall Street Has a Powerful Seat at Trump’s Table

Barry James, president and CEO of James Investment Research, said he bought the iShares Russell 2000 ETF (IWM) the day after the election because he is confident that Trump’s stimulus plan will boost the growth of America’s small businesses.

“When Trump said America First, I really think that’s what he means,” James said, adding that he believes Internet phone service vonage (GV)rent-to-own retailer of aaron (ANA) and discount chains big lots (GREAT) all could prosper if Trump’s proposals pass.

But there is another reason US markets are near record highs. Despite all the uncertainty in Washington, the US is still seen as a model of relative stability compared to other parts of the world.

Europe’s economy remains a big wild card thanks to Brexit, the rise of populism in France leading to concerns about so-called Frexit, and more concerns about the problem that never seems to go away: Greece’s debt problems.

Japan’s economy also remains stagnant. Now we are talking about more than a lost decade. is plural. And China’s economy is also slowing down.

Bond fund manager Bill Gross often jokes that America is like what Johnny Cash and Kris Kristofferson sang about on “Sunday Morning Coming Down”: the “cleanest dirty shirt.”

To that end, analysts at bond rating firm Fitch wrote in a report Friday that “elements of President Trump’s economic agenda would be positive for growth,” but added that “the current balance of risks points toward a less benign overall outcome.

Of course, there are two sides to that coin. Trump’s bombast could come back to haunt him.

Related: Oreo make is worried about the rise of populism

His continued penchant for berating companies he disagrees with on Twitter could hurt investor sentiment.

And while the US court system has struck down his proposed travel ban on immigrants from seven majority-Muslim countries for now, the president vowed to fight for their reinstatement.

Even if he loses that battle, it’s clear Trump is serious about turning more inward, with tight tariff and tax plans at the border that could spark trade wars with Mexico, China and Japan. That could hurt big US multinational companies and lead to job cuts.

But investors still seem to believe/hope that the merits of Trump’s pro-growth stimulus plans and tax cuts outweigh the impact of isolationism. Let’s hope they’re right.

Investors may be holding their noses, closing their eyes and sticking cotton in their ears to drown out the president. But they keep buying shares.

CNNMoney (New York) First Posted Feb 10, 2017: 11:55 AM ET


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