However, there were some raving lunatics who were loading up on mining and metal stocks because they thought there would be a magical trillion-dollar stimulus plan dropping into our laps. There was also a lot of enthusiasm for financial stocks because, the thinking went, inflation from deficit spending would give us higher rates and deregulation – both the soft kind and the hard kind – would miraculously boost bank earnings.
But this administration hasn't been able to get anything done yet. It has proven itself to be unfit to govern thus far, let alone to pass meaningful legislation. The stock market is populated by the smartest, most pragmatic people in the world and they sniffed this out in February or March. The collective intelligence on Wall Street runs circles around the intelligence in Washington, with way less ideology in the mix.
And that's when the non-Trump trades began to work, bigly. International stocks, healthcare stocks, tech stocks – these were all supposed to be the losers of the Trump era, not the winners. But it's the opposite. Tech and healthcare sectors are the two leading groups within the market. Overseas, there are more than 25 major foreign stock markets that are up 10% or more, beating the S&P 500. Emerging markets like China and Mexico – thought to have been vulnerable as part of the whole Trump Trade conceit – well, they're doing just fine.
As for the Trump Trade sectors themselves….infrastructure stocks are lagging. Bank stocks are lagging. Oil is flat for six months. Basic materials are the only negative sector on the year – copper, steel, coal, iron ore, you name it, they're all down. It's like a joke at this point to be talking about Trump Trades. They only exist in the media, not in the actual markets where it counts.
And the real fuel for the US stock market – earnings growth – is the only story worth telling. All the stuff about "a new tone" and "small business optimism" is great for anecdotes, but it hasn't shown up in any of the hard data.
I've been documenting market trends and fads and themes here on TRB for almost a decade. This one is no different from all the others. It's got a kernel of truth to it at the outset, and then that kernel is repeated by enough people that it begins to take hold of the popular imagination. And then, while we're waiting for reality to catch up to our expectations, a small child in the crowd has the courage to shout out "But the emperor hasn't got any clothes!"
And then, one by one, the crowd begins to see what was obvious all along. The popular market meme is defeated and we all move on to the next set of plausible reasons to buy and sell.
This commentary was originally published on TheReformedBroker.com.
Josh Brown is the creator of The Reformed Broker blog, CEO of Ritholtz Wealth Management and a regular on CNBC"s "Halftime Report." Follow him on Twitter @reformedbroker.
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