Stocks Be a Lady Tonight


When the stocks get so high

They go up to the sky,

That’s euphoria!

Apologies to Dean Martin, who was a terrific singer but was content to play second fiddle to the Chairman of the Board, Frank Sinatra. Then again, who didn’t?

Sinatra, Martin and Sammy Davis Jr. were the three great talents at the heart of the Rat Pack. They ruled the Strip when Vegas was Vegas and men were men. No one was ever more politically incorrect—and no one ever had more fun.

The Rat Pack’s heyday coincided with the peak of the 1960s go-go stock market. Which is why I’m thinking of them now, when stocks are singing “Fly Me to the Moon” again.

Back then, Americans literally went to the moon. Today it’s only the Dow Jones Industrial Average, which hit an all-time high above 21,000 Wednesday following an address to a joint session of Congress by President Donald Trump that the punditocracy declared was “presidential.”

That, and the promise of big tax cuts, regulatory reform, and even infrastructure spending unleashed Wall Street’s animal spirits yet again. But is it for real?

Maybe for a while. As I wrote last week, there’s little chance of a recession of runaway inflation over the next couple of years. It’s unlikely cautious Federal Reserve chair Janet Yellen will raise the federal funds rate much faster than Wall Street expects this year. If she does, investors would be disappointed.

The bigger risks, I pointed out, were political—that President Trump would not accomplish his ambitious agenda or that a geopolitical crisis would shake markets.

Politico’s well-connected reporters have cautioned repeatedly that Congress moves slowly, and there are great divisions among Republicans over Obamacare repeal and tax reform. So, we shouldn’t count on early adoption of those highly controversial measures.

Even Goldman Sachs, one of the Trump rally’s biggest winners (the stock is up 40% since Election Day), has warned clients that the Trump agenda isn’t a done deal. Maybe that’s why markets sold off after Wednesday’s peak. (They gained slightly on Friday.)

“Each time stocks go higher, investors are raising the stakes on what Mr. Trump must accomplish,” The Wall Street Journal’s Justin Lahart wrote.

“There remains a big risk that Wall Street is miles ahead of itself,” Politico’s Ben White added. “But for the moment, nobody wants to miss out on the party.”

The Rat Pack’s long party eventually came to an end. For Wall Street’s party to continue, Congress will eventually have to deliver on what the president has promised. That may need more than a little bit of luck. As a former casino owner, President Trump must surely understand  that.