Breakingviews: Long-term investors will be tested by Trump and his unsettling Twitter tactics

Published Tue, Nov 29 20164:14 PM EST

Breakingviews

Tom Buerkle

It will take some resolve for the Trump rally to persist. After a brief plunge in overnight trading after the presidential election victory by the New York real-estate mogul, U.S. stocks have been on a tear. Donald Trump, however, keeps chiseling away at bedrocks that underpin capitalism and free markets. Ahead of the Nov. 8 ballot, there were widespread fears over what the mercurial Trump would mean for equities. Instead, in the dozen trading sessions that followed, through Friday, the Dow Jones Industrial Average was up on 10 of them and gained 4.5 percent. Post-election, the Russell 2000 Index of smaller U.S. stocks extended its run of daily gains to 15, the longest such streak in two decades, which came to an end on Monday. More from Breakingviews : Trump can make or break global growth hopes The surges occurred in anticipation of certain Trump policies. Fund managers have pinned hopes on the prospect of stronger economic growth on the back of tax cuts, infrastructure spending and a business-friendly wave of deregulation. For investors like $5 trillion BlackRock, which have been urging companies to stop obsessing about quarterly profit and focus on long-term value creation, the reaction can be considered partial vindication. The big picture suggests a fundamental shift is under way from an era of interventionist government to a more laissez-faire one. Another broader destabilizing Trump message can't be ignored, however. He is now questioning – without any evidence – the popular vote count he lost. Trump also challenged the First Amendment on Tuesday morning, tweeting that flag-burners, who are protected under a Supreme Court ruling, should be jailed. His unsettling tactics may be a ploy to keep opponents off- balance, a way to divert attention from more controversial subjects, such as his own business conflicts of interest that may violate the U.S. Constitution, or the product of an undisciplined mind. None of those explanations is conducive to the consistency and predictability investors typically crave. The strength of the American economy and its stocks depend on the rule of law that buttresses it. While it may be easier to stare narrowly at perceived benefits of certain policy initiatives, Trump will test the market's faith. For more independent commentary and analysis from Reuters Breakingviews, visit breakingviews.com

Donald Trump

Jonathan Ernst | Reuters

Ahead of the Nov. 8 ballot, there were widespread fears over what the mercurial Trump would mean for equities. Instead, in the dozen trading sessions that followed, through Friday, the Dow Jones Industrial Average was up on 10 of them and gained 4.5 percent. Post-election, the Russell 2000 Index of smaller U.S. stocks extended its run of daily gains to 15, the longest such streak in two decades, which came to an end on Monday.