Since Donald Trump was elected to the highest office in the land, the stock market has jumped to new highs. The president attributes that rise to his win but there is another explanation. As Liz Ann Sonders, a strategist of Charles Schwab, explains, companies are anticipating a rise in inflation. The cost of borrowing will rise as government increases its debt to pay for the president’s proposed overhaul of the infrastructure. Companies with surplus cash have decided to buy back their stocks now to avoid the higher interest rates later. Those buybacks are what’s pushing the stock market higher. If the buyers were retail investors, hedge and pension funds, that would be the sign of a healthy market. But those buyers remain on the sidelines. (Keeping and Eyed on the Animals,” by Matt Heimer, Fortune, January 1, 2017, pg. 40-42.)
Still, good news is good news. Even the tech industry has made its pilgrimage to Trump Tower, hoping reset the rocky relationship that occurred during the presidential campaign. They have reason to be hopeful. Trump is a man who understands the bottom line. His administration is more inclined to turn a blind eye on monopolistic, mega mergers than the Obama administration. New enterprises will probably emerge as former regulations are repealed making it easier for start-ups. Already, Elaine Chao, the new Secretary of Transportation, “ has signaled friendliness to the so-called gig economy that includes Uber and Lyft’s fleet of part-time drivers.” (“In Trump Tech (Must) Trust,” by Erin Griffith, Fortune, Jan 1, 2017, pg. 52) Also likely to benefit from law changes will be online gambling enterprises and money lenders.
Adding to the euphoria is Trump’s promise to reduce corporate taxes. Surplus money from those cuts are likely to flow into the stock market, making the rich richer. Is Appalachia happy yet?
Courtesy of google.com
