April 13, 2017
David Rosenberg, the chief investment strategist at Gluskin Sheff & Associates Inc. who this year has turned more pessimistic about stocks, says the “Trump trade” is fading as President Donald Trump makes “flip-flopping great again.”
The president this week softened criticism of targets he lambasted during his presidential campaign such as China, the North Atlantic Treaty Organization and Federal Reserve Chair Janet Yellen. He also directed an airstrike on Syria, the Middle Eastern country that has been embroiled in a civil war for the past six years.
“The key here, as we all learn to still take the President seriously but not literally, is that we cannot really take him at his word at all,” Rosenberg said in an April 13 report. “We are still in the first 100 days, and so many campaign proposals have fallen by the wayside. Why should investors still have tax reform, deregulation and infrastructure priced into the markets at all?”
The S&P 500 rose more than 12 percent after Trump won the November election on a platform to “Make America Great Again” with tax cuts, limits on stifling regulation, healthcare reform and spending on roads, bridges and airports. After reaching a record high in March, stocks stalled out after the Republicans withdrew a plan to change the healthcare law, casting doubt on Trump’s other pledges.
“The entire ‘Trump Rally’ has not just hit resistance levels but is in reverse,” Rosenberg said, citing technical indicators that investors are losing confidence in the Trump agenda. “The 10-year Treasury note yield, the S&P 500, the Dow Jones Industrial Average and the DXY U.S. dollar index all slipped below their respective 50-day moving averages. That last happened in September of last year, ahead of that period of pre-election jitters.”
Trump’s approval rating has fallen since Inauguration Day, and he may risk losing his base as he caters to independent voters with a more centrist message, Rosenberg said. Trump had pledged to “drain the swamp” of Washington elitist privilege and disengagement from voters.
“No swamp has been drained – that his chief economist is a former Goldman Sachs executive is proof of that assertion,” Rosenberg said of Gary Cohn, the former president of Goldman who is now director of the National Economic Council. “If [Trump] is a king, he is a king of jawboning. Markets operate around bounds of uncertainty and these bounds just became far wider than they were before.”