Patience is a virtue that the stock market seldom displays.
The market travels in sudden bursts, not a steady pace. It gets antsy if made to sit still for a while. In football terms, investors are like an undisciplined linebacker "overpursuing" whatever trend they see developing - often falling flat when the trend stutter-steps.
This is all relevant now because the indexes' run to record highs in recent months has been accompanied by a hopeful story line about what's to come – a rush of business-boosting policies under a President Trump and (almost as an afterthought) a sharp snapback in corporate profits as 2017 unfolds.
Now that stocks appear a bit rich and the tape's momentum has slowed, it's worth asking if investors have the patience to hang on for months until it's known whether all this comes together as the bulls wish.
If the market's fate comes down to getting taxes cut and regulations lifted and infrastructure spending deployed, things probably won't happen quickly enough for investors. All we have now are the unformulated proposals of a still-unformed administration, whose elected leader has not delivered a steady message about legislative priorities, to put it gently.
Kim Wallace, head of Washington research at Renaissance Macro Advisors, told clients last week that he is "skeptical on timing" of any tax package out of Congress. "Expect Trump to focus on tax and healthcare policy to start, but the process will be slow. We doubt anything significant is out of committee in the first half."
Six months with nothing significant reaching the House floor would probably outlast the patience of policy-focused investors.
The good news, though? What we call the Trump Rally has not fully been that at all - and is probably less tied to Washington than the typical 2017 outlook commentary contends.
Not only were interest rates and inflation indicators perking up starting last summer, but the election came amid the strongest run of upside economic surprises and the best levels for global manufacturing gauges in four years, notes Cornerstone Macro strategist Francois Trahan (who is among the only vocal market bears on the sell-side right now, worried that the macro improvement is priced in).
There's no doubt that the election and its prospects of a fiscal jolt catalyzed and crystallized the mass recognition of a tightly wound economy gaining momentum, and better chances for the Federal Reserve to "normalize" interest rates. And it so happened that the obvious plays on higher growth, lower taxes, easier regulations and infrastructure investment were among the cheapest, most under-owned stocks. That sent them flying in the weeks after the election.
Especially in the last month, the standard "Trump trade" stocks have not been lifting the indexes at all, though. Over that span, industrial and bank shares have lagged the S&P 500, while Big Tech (believed to be disadvantaged by Trumponomics) has outperformed.
A basket of 16 stocks Goldman Sachs identified as the greatest beneficiaries of lower effective tax rates
is down 1.9 percent on average in the past month, versus a 1.2 percent gain in the S&P 500.
If the S&P's latest trudge to new highs hasn't been all about policy, then the more salient question is whether the trajectory of corporate earnings and the economy alone, unenhanced by any possible goodies from Washington, could tide the market over.