Over the past couple of weeks, the market has continued to remain overbought, extended and exuberant on “hopes” that Trump’s policies will be the ointment to cure the economy’s ills. As noted yesterday, exuberance has exploded in everything from consumer to investor to business optimism.
The explosion of optimism is interesting given the consistent diatribe over the last few years about how well the economy was performing under the previous administration. This is the equivalent of a company’s stock price surging when the previous CEO is replaced which doesn’t speak well of his “legacy of performance.”
The question now is whether or not “hopes” will translate into “reality.”
Interestingly, since the beginning of the year, the rush to pile into “Trump Trades” has quickly evaporated as transaction volumes have plunged as “anticipation” has turned into “wait and see.”
It is worth noting that previous, when transaction volumes have plunged to such low levels, the markets were generally at an inflection point of a correctionary process. With the markets currently extremely overbought and extended, the reality of a “sell the inauguration” trade is possible.
In the end, “anticipation” of better outcomes is one thing when it comes to the financial markets and your money, however, “reality” is quite another.