Trump Risk Is Rising


For the last few weeks, in my MarketWatch column and GoldenEgg Investing®, I’ve been laying out why the risk of a stock market correction is rising.

It boils down to an overvalued market that’s overdue for a pullback and some key technical signs that have started to flash yellow. You can read my whole case here and here.

But another factor is getting more and more important: the erratic behavior of the president of the United States.

Markets generally don’t trade on politics; stocks thrived under presidents as diverse as Lyndon B. Johnson, Ronald Reagan and Bill Clinton. They did well in the early years of the George W. Bush administration only to tank later. They slumped in the first two months of the Obama presidency but then started a long bull market that has lasted until today despite tepid economic growth.

Truth is, stocks generally trade on interest rates and earnings growth. Period. Geopolitical crises may prompt panic selling, but stocks almost always wind up higher 12 months later. Investors usually don’t give a damn who’s in the White House.

But though I hesitate to write these words, this time may be different.

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