by Umar Farooq
Will the financial bubble that has been rapidly growing ever since Donald Trump won the election suddenly be exploded once he takes office? Could it be possible that we are being set up for a horrible financial crash that he will ultimately be blamed for? We have seen an incredible euphoria since Donald Trump’s surprise victory on November 8th. The U.S. dollar has been surging, companies are announcing that they are bringing jobs back to the U.S., and we are witnessing perhaps the greatest post-election stock market rally in Wall Street history. In fact, the Dow, the NASDAQ and the S&P 500 all set new all-time record highs. What we are seeing is absolutely unprecedented, and many believe that the good times will continue to roll moving further ahead in 2017 as well. The market seems to think that the possibility of fiscal stimulus from Trump and the Republican-controlled Congress will lead consumers to spend more.
What has been most surprising is how well the stocks of the big Wall Street banks have been doing. It is no secret that those banks poured a tremendous amount of money into Hillary Clinton’s campaign, and Donald Trump had some tough things to say about them leading up to election day. So you wouldn’t think that it would be particularly good news for those banks that Trump won the election. However surprisingly, since Trump’s victory, all of the big banking stocks have been climbed sharply. The election of Donald Trump has been stock market manna for every industry that benefits from an expanding economy.
But are these stock prices justified by the earnings fundamentals? Certainly not! But during euphoric times fundamentals don’t matter much. Major correction in the stock prices is coming in the next two weeks. NASDAQ will give up more as the technology stocks start reporting their earnings. It seems that no Financial will live up to the expectations. The Trump inauguration has yet to occur and there is a vacuum. A bunch of the technology stocks that have been pulled up in the stock rally are going to be seriously hammered down. Blue chip stocks such as Apple, Microsoft, Facebook, Netflix, Amazon and IBM will plunge.
One thing that is told by Obamacare is that medical costs are out of control. Medical costs are in fact too expensive, they all need to come down. The entire global drug place has been subsidized by the previous administration. The politicians need to correct the policy or the entire health care system is going to explode. Pharma stocks are going to be slammed further as the Trump administration try to sort out the drug pricing and other issues.
Throughout the U.S. history, every giant financial bubble has always ended very badly, and this time around will not be any exception. Although, Trump may be considered as the culprit for it when it bursts, but the fact is that the circumstances for the upcoming crisis have been building for a very, very long time.
— Lance Roberts (@LanceRoberts) January 16, 2017