Multiple business leaders and Wall Street strategists have expressed concerns over President Donald Trump’s protectionist policies and unpredictable nature and their effects on the markets and economy.
However, the actions of investors tell a different story. The Dow, S&P 500, and Nasdaq have reached all-time highs once again.
Additionally, the Russell 2000, an index that represents small company stocks that primarily operate in the U.S., is just a few points away from its all-time high in December, following the Trump market optimism.
Furthermore, the VIX (Volatility Index), known as Wall Street’s fear gauge, is down approximately 25% this year. If investors were genuinely concerned about Trump, the VIX would be much higher.
CNNMoney’s Fear & Greed Index, which considers the VIX along with six other measures of investor sentiment, indicates signs of Greed and is approaching Extreme Greed levels.
Although Trump continues to tweet about issues that are unrelated to the economy, such as his daughter’s brand, Nordstrom investors have actually profited.
However, credit must be given where it is due; one of the main reasons for the recent surge in stock prices is Trump’s promise to unveil a “phenomenal” tax plan soon.
Related: U.S. Stocks Have Rare Streak Without a 1% Decline
During his meeting with airline CEOs, Trump reiterated his commitment to investing more in infrastructure.
This is what the market wants to hear.
Matt Lockridge, manager of the Westwood Small Cap Value Fund, believes that many companies generating most of their revenues from the U.S. will benefit from Trump’s stimulus plan, which will boost the economy.
Lockridge recommends stocks in various industries, including Masco, a movie theater owner, J & J, a snack food firm, and Kaman, an aerospace equipment company.
Another money manager shares a bullish outlook on small U.S. stocks due to potential benefits from Trump’s policies.
Related: Wall Street’s Influence on Trump
Barry James, president and CEO of James Investment Research, purchased shares of the iShares Russell 2000 ETF the day after the election because he is confident that Trump’s stimulus plan will boost growth for U.S. small businesses.
James also believes that Internet phone service Vonage, rent-to-own retailer Aaron’s, and discount chain Big Lots could thrive if Trump’s proposals are implemented.
Another reason for the near all-time high of U.S. markets is the perceived relative stability of the U.S. compared to other parts of the world, such as Europe, Japan, and China.
Europe’s economy is uncertain due to Brexit, rising populism in France, and ongoing concerns about Greece’s debt.
Japan’s economy remains stagnant, and China’s economy is slowing down.
Bill Gross, a bond fund manager, has referred to the U.S. as the “cleanest dirty shirt.”
A report from bond rating firm Fitch acknowledges that some of Trump’s economic agenda could have positive effects on growth but warns of potential risks to the global economy.
However, there are two sides to this coin. Trump’s strong rhetoric and Twitter reprimands could negatively impact investor confidence.
Additionally, his proposed travel ban and plans for tariffs and border-adjusted taxes may lead to trade conflicts and job cuts among big U.S. multinational firms.
Despite these concerns, investors still believe that Trump’s pro-growth stimulus plans and tax cuts will outweigh the negative effects of his isolationist views.
Investors may not approve of all of Trump’s actions, but they are still buying stocks.
CNNMoney (New York) First published February 10, 2017: 11:55 AM ET
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