Far be it from me to throw cold water on any rally, relief or otherwise. But a week from now, we will probably not be talking about a magnanimous Donald Trump and a gracious Hillary Clinton around here. We may not remember that this week's rally so far, 3.5%, is the strongest of 2016.
No, I am not saying they will be pointing fingers any more or trash talking every minute. I am saying we will be stuck in a world of some unknowns that will be a source of anxiety and therefore selling, and not comfort and therefore buying.
When the euphoria dies down, here's what we will be thinking about.
First, how independent will the Federal Reserve be of President Trump? Will Janet Yellen finish her term? Will Trump break with protocol and denounce the Fed for keeping rates recklessly low? That's a bad headline.
Two, we think Trump will greenlight mergers because they are good for business, but what if he says they are anti-competitive and he'll appoint people to block them, like he wants the Time Warner (TWX) -AT&T (T) tie-up blocked? Maybe he puts a stop to the big health care mergers like Humana (HUM) -Aetna (AET) and Cigna (CI) -Anthem (ANTM) , which are already being contested by the Justice Department? M&A has been a major prop of this stock market.
Three, what if he is true to his word and says NAFTA's dead? Sure, we get fewer jobs going to Mexico, but they aren't coming back. Instead, we get higher prices, inflation. Not positive for stocks. You may not like the jobs they take away, but you might like the cheap prices of goods they afford you.
Four, who is going to be Treasury secretary? What if he picks someone from left field, a real rebel? So much for the big bank stock rally.
Fifth, what if he starts a trade war? It's one thing to bust NAFTA and demand fair trading. We've been on the losing end of our trade deals for years. In the typical trade deal, we let the Chinese make stuff and pollute the hell out of the environment and then ship it here for well under cost to keep their jobs and take away ours. That has to end.
But what if the Chinese decide no longer to buy Boeing (BA) planes? What if the party stops allowing Starbucks (SBUX) or Yum China (YUM) or Nike (NKE) or Under Armour (UA) to open stores or sell goods? You know they could do that. Same goes for capital projects that might involve Honeywell (HON) or Emerson (EMR) or General Electric (GE) or United Technologies (UTX) . Maybe they say no to our diapers, baby formula, shampoo and toothpaste. Or they take away slots from our airlines. Or slap tariffs on our cars. Earnings will be slashed for many of the stocks that rallied today. (Starbucks and General Electric are part of TheStreet's Action Alerts PLUS portfolio. Under Armour is part of the Growth Seeker portfolio.)
What if the move in interest rates keeps accelerating? Mortgage rates go up too fast and housing gets hurt. Those stocks already started getting hurt today. In the meantime, the bond market-equivalent stocks, the big packaged-goods yielders and the real estate investment trusts and utilities see their stocks annihilated.
Finally, what happens if we start drilling for more oil at the same time the dollar soars because of our higher interest rates? An American-made glut in oil has meant lower stock prices. A stronger dollar clips earnings estimates for the big international enterprises.
I am not saying be careful what you wish for. I am simply acknowledging that we will soon be factoring in some sobering narratives. Don't get cocky. Relief rallies don't last when faced with a new set of facts. They just tend to fade away.
