After Donald Trump’s historic election victory, optimistic investors are pricing in a massive U.S. economic recovery. There’s really no other way to slice it.
Take a look at the (staggering) market performance since November 7th:
- S&P 500: +4.4%
- Industrials (XLI): +8.8%
- Russell 2000: +11.8%
- Financials: +13.5%
Pretty remarkable.
In the video excerpt above, Hedgeye CEO Keith McCullough takes a closer look economic cycles. In particular, how the Industrials sector typically leads the broader economy both into and out of expansion and contraction. Now, with Industrials rebounding out of what has been a protracted recession, the market is sending a clear signal that investors believe Trump’s presidency will be a game changer for the Industrial economy.
Will it hold? That’s the billion dollar question, McCullough says.
“The ultimate question here is whether Trump-induced expectations of growth accelerating can trump the cycle itself,” McCullough said on The Macro Show today.
He went on to explain what we’re debating internally right now:
“What happens if GDP slows to 0.5% [from 1.5% in Q3] and the market doesn’t care. I talked about this all day yesterday with institutional investors in the Midwest. This is very clear in my mind. What I do next isn’t so clear but I understand precisely what the market is pricing in. The market is pricing in that the industrials are done being in a recession. They’re going to lead into the next expansion. And big government spending by the trump man is going to be the catalysts for that.”
