We're calling it the Trump rally. Why not? One year ago the averages were much lower; one year ago we were taken by surprise by this business person turned politician and while things seemed fraught with unknowns, the market's judging President Trump as a force for higher prices, perhaps because he grades himself on the averages and so far he's getting pretty darned good grades. So far he's up 21%, if the S&P and not the pollsters, are determinant of his ratings.
Now, before we go crazy about that, consider that the Nikkei of Japan's up 33% during that period, the Dax of Germany has rallied 29%, and Hong Kong's Hang Sang is up 27%, tied with the Kospi of South Korea.
I would hesitate to conclude that Trump's behind those rallies, especially because he's been tough on our trading partners, particularly Korea and China. Plus, if you want real irony, Sara Eisen points out that the strongest performing currency in this period is the ruble, plus 7%. Maybe that's what all those ads were for!
Now the president has been a terrific salesperson for our international companies, often making it clear that if you want to appease him, you buy American. This latest tour to China is chock full with CEOs who want more Chinese business. That's quite a change from when he was elected where the feeling was he was going to side with the workers to keep foreign countries from dumping their wares here. I know that we bought Nucor (NUE) for the charitable trust believing that Trump would pressure the Chinese and the Koreans to stop dumping -- and that's exactly what they are doing.
Instead he's been two-tracked: build plants here to hire American workers and close our trading deficits there by buying our goods. Judging by the factory announcements and comments by American Electric Power (AEP) and Dominion (DOM) that they are seeing growth of all kinds with greenfield operations being built, I can say pretty convincingly that Trump's had some real success in pushing foreign companies that use or abuse our markets to open plants here.
However, I see little movement to close the trade imbalances so far and the companies he's working with are the same big ones that did pretty well under President Obama. I don't know if that's a sell-out or not. I do know that a year ago it wasn't the message.
Now we haven't been able to get through any tax legislation yet that would make the code less onerous for business. That's in part because Trump's ambitious plans can't be squared with a fractious Congress. I reiterate that I see only minor changes coming and not much that can spur the economy. I do believe if you repatriate money, companies would be more inclined to buy other companies with the cash, which would defeat the purpose of creating more jobs; however shareholders would certainly benefit.
It's simply too difficult to get anything large done here because there are too many opposing interests that are all trying to expand the deficit with their demands or keep it high. The most vociferous group in Congress -- the tea party people -- are dead set against anything that makes the deficit grow. We don't know what's in the bill, which is disconcerting itself, but we are hearing things that will create a huge backlash, everything from a pass through rate that reminds me of when sharp people would try to turn ordinary income into much lower capital gains rates, to the curtailing of the mortgage deduction to eliminating the break of deducting state and local taxes, the latter being a death sentence for any Republican politician from a state with high taxes who supports the legislation.
My prediction: not uniformity, but chaos just like Repeal and Replace because there's just no unanimity on what's right and what's not -- the opposite of the last big tax overhaul, the one done by President Reagan who crossed the aisle seamlessly to get it done.
That said, I interview dozens of CEOs, especially the bankers, who like this regime because there are no negative surprises from the White House. There are errant tweets but they have more bark than bite as we know from Lockheed (LMT) , United Technologies (UTI) and Boeing (BA) all of which were dinged by the president and all with stocks doing fabulously.
Deregulation has helped and the bank stocks do well in that environment, but they do even better when rates are going higher, and they are regardless of Trump's comments. Where the real gains have been are in the energy patch where a benign atmosphere reigns, making it easier to drill pretty much everywhere. That's had the unfortunate collateral damage outcome of overproduction here, keeping a lid on prices. The Saudis, who helped put them there, now seemed determined to get them higher. Suddenly all of that futures selling by American outfits to finance drilling seems to be drying up, too, which makes sense given that they make good money at current prices and don't need to hedge.
Still though, it might be a helpful lesson to go over the winners since his election and see if any of that performance can be traced to Trump.
First is Nvidia (NVDA) which reports tomorrow. This maker of chips for everything from autonomous driving to bitcoin mining, to gaming and artificial intelligence has seen its stock soar 194%. For the record we have told club members of Actionalertsplus.com that if they haven't bought it ahead of the announcement wait, because it can easily sell-off on any missing line of growth.
Next is Align Technology (ALGN) The maker of the Invisalign system for your teeth has seen its stock roar 179%. This is pure selfie generation stuff, and I blame the iPphone for the need to look better than you have for Instagram and maybe Snap (SNAP) although from last night's quarter I think we can say Insta's driving the bus.
Micron (MU) comes up next and this stock's been a horse because the demand for its DRAM and flash memory chips has overwhelmed supply because of voracious data center demand. It's 250% increase is a lot more internet of things than it is politics.
NRG Energy (NRG) is a replace and repair job, as new management has come in to make NRG more of a traditional utility. The 144% gain is more of a coiled spring from a low level than anything to write home about.
Lam Research (LRCX) makes the machines which make the chips and its orders are off the charts. Like Micron, there are many people who believe this pace is impossible and it is going to make too many machines to make chips. That no longer seems likely. That's how you roll up 110% Applied Materials (AMAT) competes with Lam which is a real good house to be in and it explains that explains the 91% gain for AMAT's stock.
Number six, United Rentals URI, has a Trump bias, if you believe that deregulation plays a role in the psyche of those who rent heavy equipment. But I think the storms had a hand in this stock's 93% gain.
Boeing's (BA) got a slew of orders and has definitely benefited from both its considerable defense business and the president's relentless pursuit of orders although one of the biggest, from Iran was certain NOT Trump's doing. Still you have to give him credit for some of the 87% gain.
Next Vertex Pharma's (VRTX) strong stock performance has to do with its success in tests that offer a life- saving maintenance regime for people with cystic fibrosis. That's incredible and it has driven up the stock 80%
Finally, Paypal (PYPL) finishes the top ten, with a stock gaining 79% during this period. I can't possibly think of a linkage between this payment processor's growth and Trump. I think that the credit goes to Dan Schulman and his team for becoming the millennial/ Gen X credit card company. Once thought to be the enemy of every bank and the big credit card companies, he's now courted by these companies who can't afford to miss out on his clientele.
Now there's a long list of other stocks that have done well but I have gone over them and there's not many that can be pointed out as linked winners. There are the healthcare insurers that have done well but isn't that because of a FAILURE to repeal and replace rhetoric? Most of the others in the top 30 have a tech theme to them, great for international sales as the dollar's been weak but, again, I don't know how much can be ascribed to President Trump.
In short while the market's good, I will let the CEOs who have driven stocks up be the real heroes even as the benign atmosphere of the president has created a sweet backdrop for many executives.