Investing is a balance of hope and fear. Since Election Day, investors have been hoping for strong corporate profit growth helped by new economic policies from President Donald Trump. Those expectations have led to the Dow Jones industrial average trading above 20,000 for the first time and a 9 percent jump in the S&P 500 stock index.
Except for some end-of-year profit taking, it has been a steady climb higher in stock prices.
That progression paused as the new administration settled in but stirred up controversy over immigration, foreign relations and international trade. Certainly, there was real economic news for the markets to absorb. The Federal Reserve held firm on interest rates, job growth continued in January, and Apple – the most widely owned stock – reported better-than-expected financial results.
And while it may seem reasonable to attribute stock market activity to politics, an investment portfolio is not necessarily a partisan expression.
Presidents don’t control the market. They certainly can influence the overall environment in which company executives and consumers make financial decisions, but economic and business fundamentals ultimately are responsible for long-term trends for investors.
In the week ahead, as companies continue reporting their quarterly financial results and make predictions about the future, investors will be pressed to separate profit expectations from political volatility.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. Follow him on Twitter @HudsonsView.