Donald Trump’s first 200 days in office recently concluded with no major legislative victories to speak of. Despite this, more than half a year after his election, the Dow and S&P 500 rose to hit record highs. Markets largely sustained their gains through the new president’s first few months in office. The S&P 500 has limited patience, however.
After a rise beginning on the day Trump was elected, S&P gains have fallen drastically in the 200 days since (Chart 1). The initial boost from the Trump Bump exceeded 6 percent, but that rate was almost halved during the president’s second 100 days in office.
From day 151 through day 200, the S&P 500 was almost flat, and in the 10 days running up to August 8, 2017, his 200th day in office and the day of his “fire and fury” threat to North Korea, the market hardly budged at all. Ongoing delays in the passage of a health care bill and tax reform legislation have only added to the uncertainty eroding market optimism. The market remains below its August 7 high.
A more sober view of the Trump administration is also evident in the S&P sectors. The profile of gains from the initial Trump Bump (election to inauguration) matched his legislative agenda, with financials, telecommunications, energy, industrials, and materials all benefiting from rhetoric around his tax cut/deregulation agenda.
However, the sector gains in the first 100 days after the inauguration reflected a more realistic, possibly even pessimistic, view of his likely legislative progress — with some sectors such as telecommunications and energy actually retreating. Individual sector fundamentals have dominated the second 100 days with performance, reflecting a mixture of sector-specific fundamentals, with minimal gains and some losses in sectors like telecom, energy, and consumer products (Chart 2).
Thus, the Trump effect that boosted markets is beginning to fade as cyclical effects in an aging expansion take hold. The 45th president will likely face further stock market setbacks as his legislative agenda remains in limbo.
Not only are investors voting with their wallets but corporate financial reports suggest companies themselves are growing more disillusioned. Mentions of Trump in SEC quarterly financial statements fell by half in the second quarter of 2017 compared to the fourth quarter of 2016. Companies are coming to realize that the rhetoric coming from the White House doesn’t necessarily mean policy action, and what really matters now are the underlying economic fundamentals.
 Kilgore, Tomi, and Ciara Linnane. “Trump’s Failure to Enact Policy Is Having a ‘Chilling Effect’ on Earnings.” MarketWatch, MarketWatch, Inc., August 16, 2017.
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