Every day stocks are hitting all-time highs—why? How long can this last?
You might have noticed that the stocks have been doing really well lately. As in, the longest running streak since 2013. S.&P. 500 index is up over 9 percent, and with money continuing to pour into stocks from bond and money market funds, the bull market is showing few signs of letting up. What's pushing things forward? One word: DEREGULATION. People are banking on Trump's promise to de-regulate and deliver market-friendly policies. Top priorities include rolling back regulations put in place by former President Barack Obama to keep large banks and funds in check. Dodd Frank is first on the chopping block. Some smaller loosening of financial regulations has also provided encouragement. Just this week Commodity Futures Trading Commission, the main derivatives regulator, said it would not penalize institutions for violating new derivatives standards.
HOWEVER, while the VIX (volatility index) is low now, economists say we are in for a contraction. What’s happening is high risk, high return investing.
What does this mean for investors? Is now the time to buy? What about 401ks?
Savings deposits and money market funds, the two safest and lowest return options for the risk-wary, doubled to nearly $9 trillion at the end of last month from $4.5 trillion in early 2009—people are feeling safe about parking their money into the markets. HOWEVER, this is a personal decision, investing is very individual and I would talk to a RIA in order to get some advice.
ALSO: A specific and large section of the investing population who wasn’t in the market for the past 3-4 years are starting to care less about the headlines focus more on the economy.
How much of a contrast is this to what experts said when Trump was elected?
Experts no doubt got this wrong, BUT this was based on historical data. Unproven politicians mostly impact the markets negatively. This wasn’t the case for Trump.
What does this mean for interest rates?
Interest rates will continue to rise, as they should. If Trump delivers on his promises with new job generation and deregulation, the economy will be on an upward growth and despite interest rate increase, we will be able to handle it. U.S. GDP growth will rise to 2.1 percent in 2017. That's better than the 1.9 percent estimated for 2016 and the same as 2015's growth rate of 2.1 percent. The increase in Gross Domestic Product will flatten to 2.0 percent in 2018.
Best advice for riding this wave?
Certainly speak to your registered investment advisor about strategies, historically, the stock market has been on a long term upward trajectory, so every year you think you are going to hold out is money you could be making. Also be aware of long-term policies and if they are being executed. Are jobs being created? If so where? Will they provide long term income so that people can invest? For example, Start Up New York only created 400 jobs- rebranding "Excelsior Business" and tweaking the eligibility requirements for companies looking to relocate or start their businesses in New York State.
I joined Neil Cavuto on Fox News to joins to discuss the Dow closing at record highs. Check it out: