It takes a lot to distract the stock market from money matters. But every once in a while a political event is so huge, it trumps everything else.
STOCK MARKETS & POLITICS, by Richard Evans
POLITICAL BULL, MAY 11, 2017
In general, the stock markets are driven far more by earnings and the economy than by politics. But a while ago an event occurred in Washington that may be a sign of things to come:
The Senate voted to uphold an Obama climate change regulation that limits the release of methane gas from oil and gas wells on public land. The vote was close: 51 to 49. But the regulation stands.
What does this have to do with the stock markets? Not much if this vote becomes an isolated incident. But if it becomes a pattern--different story.
The current bull market is at record or near-record highs, partly because professional investors expect Trump to lower taxes and ease regulations. That's a reasonable expectation only so long as Trump can get Congress to do his bidding. With majorities in both House and Senate, he could get his way.
But not necessarily. In general, lawmakers have to toe the party line--unless that's going to cost them votes at home. And there are signs that some of that is starting to happen. There is, for example, the hashtag Trump Regrets, where Trump voters sound off about their disappointments.
Bottom line: Stock investors would be wise to keep a close watch on how much of Trump's agenda becomes law. If we see several more instances like the vote on methane gas, it may be time to reconsider the merits of bonds, especially in view of the current, top-heavy stock market.