Trump Era Stock Market Rally: An Unexpected Resilience

The global economy has thrown the kitchen sink at President Trump’s stock-market rally, but so far nothing has been able to stop it.

The S&P 500 has gained 18.7 percent this year, even as traders grappled with large swaths of geopolitical uncertainty and worrying economic data.

“Yield curve inversion, U.S.-China trade war, recession in Germany, collapse in Chinese industrial production, contraction in global profits, oil price spike, BREXIT, Trump impeachment inquiry, Argentine default/Ford downgrade/Thomas Cook bankruptcy ... yet risk assets close to all-time highs and U.S stocks on course for 30 percent annualized returns, global stocks 24 percent, commodities 17 percent, global investment grade & high-yield bonds 14 percent, U.S. Treasuries 10 percent ... breathtaking stuff,” Michael Hartnett, chief investment strategist of Bank of America Merrill Lynch wrote in a note to clients on Friday, calling it a “Miracle on Wall Street.”

Trump, who likes to use the stock market as a scorecard for his presidency, couldn't agree more with such sentiments.

“Do you think it was luck that got us to the best Stock Market and Economy in our history?” the president tweeted earlier this month. “It wasn’t!”

The S&P 500 has gained 39 percent since its close on November 8, 2016, aided by Trump's tax cuts and deregulation. The benchmark average has set 102 records since Election Day, and Bank of America predicts the good times will keep rolling, at least for now.

“We remain 2019 irrationally bullish,” analysts wrote. Not everyone is so sure.

Hubert de Barochez, markets economist at the London-based Capital Economics, says slowing earnings growth could threaten the more than 10-year bull market, the longest in history. He sees the S&P 500 falling 15 percent through year-end.

"We don’t forecast a recession in the U.S.,” he wrote. “But the manufacturing sector and the yield curve are sending worrying signals, and we think that the U.S. economy will continue to slow over the coming months. Furthermore, we expect growth in the rest of the world – where firms in the S&P 500 make roughly 40 percent of their earnings – to remain weak.”