The Trump Rally is back on again.
Wall Street didn't get the nitty gritty details it wanted on policies such as tax reform and trade from President Trump Tuesday night in his speech to Congress, but the commander-in-chief's "presidential" tone set investors at ease and they pushed the Dow up more than 300 points to a record-setting close above 21,000.
Investors are taking Trump’s measured and positive demeanor as a sign that he will have a better chance of getting his economic agenda through Congress.
“Trump’s speech was upbeat, all-inclusive and presidential," says Bruce Bittles, chief investment strategist, at Baird. "We have a leader and that is what all the excitement is about.”
In his address to a joint session of lawmakers, Trump reiterated his push for “historic tax reform” that will put American businesses on a level playing field with foreign competitors, repeated his calls for a $1 trillion infrastructure spending plan and noted that his administration has “undertaken a historic effort to massively reduce job‑crushing regulations.” The president also repeated his promise to repeal and replace Obamacare.
Wall Street was also listening for the things Trump didn't say. He didn't echo recent attacks on the media, complain about fake news or mention spats with celebrities and other topics considered "off message."
"What matters is if he can show the leadership necessary to push his plan through Congress. The odds of success improved significantly last night because his speech was expertly crafted and he stayed on script," says Alan Skrainka, chief investment officer at Cornerstone Wealth Management.
The Dow Jones industrial average's close above 21,000 came just 24 trading days after the index hit the 20,000 milestone. The last time the Dow closed up more than 300 points was on Nov. 7, the day before the presidential election, when it jumped more than 371 points. On Tuesday, the Dow’s streak of 12 straight sessions of record highs was snapped with a 25-point decline.
On Wednesday, U.S. stocks gained across the board. The broad Standard & Poor's 500 index rose 32.32, or 1.4%, to 2395.96, while the Nasdaq composite climbed 78.59, or 1.4%, to 5904.03. The Dow closed up 303 points, or nearly 1.5%, at 21,115.55 while the smaller company Russell 2,000 gained almost 2%.
Investors have pocketed a tidy sum -- at least on paper -- in the Trump era. Since his inauguration market gains, as measured by the Wilshire 5000 Total Market Index have amounted to $1.3 trillion, with $3.2 trillion in paper wealth since election day.
Wall Street grabbed on to Trump’s more conciliatory and upbeat message, such as his call for a “renewal of the American spirit,” and his promise that “dying industries will come roaring back.”
Trump’s pledge to work across the aisle with Democrats raised hopes on Wall Street that his agenda will now have a better chance of being implemented.
“I think investors were set up for hearing a real negative speech, which is more indicative of Trump’s style,” says Wayne Wicker, chief investment officer at ICMA-RC. “Just having a positive tone suggests to investors that his fiscal policies might have a better opportunity to move forward.”
Adds Dan Clifton, a Washington policy analyst at Strategas Research Partners: "(Trump) set out a course for Republican members of Congress to rally around. He also sent a signal to Democrats that he is willing to work with them."
Trump’s words might also have bought him some time with impatient investors.
“Wall Street is giving him more time after this speech; not a lot more but some,” says David Kotok, chief investment officer at Cumberland Advisors. “Acting as an adult, he has pushed back the timeline of reaching a deal with Congress. The speech was his best ever as a president. It was salesmanship. Making the deal starts with selling it.”
Despite the good reception of Trump’s speech from Wall Street, there are still risks facing a stock market that has run up sharply since Election Day on hopes Trump will get his agenda passed, notes Greg Valliere, chief strategist at Horizon Investments.
“The markets saw a strong president, and they liked it,” says Valliere. “Fears of a stumbling administration have been allayed, at least for now. Trump’s temperament always was a market concern, but suddenly there's hope that he's growing in the job.
"Despite the mature demeanor, the markets are still leery that Trump’s agenda could stall if the divided congressional Republicans can't agree on an Obamacare replacement," Valliere says.