Is the Trump Rally Real?

The market has rallied strongly after Donald Trump won the election on the expectation of a raft of economic stimulus. The market is acting like it is almost a certainty that the administration will follow through with it’s promise to enact substantial corporate and individual tax cuts along with a large (or perhaps “bigly”) infrastructure spending bill.

Despite Republican control of both branches of government I’m not so sure huge tax cuts and infrastructure spending are a lock. Both Mitch McConnell and Paul Ryan are on record as opposing any stimulus spending and wanting any tax cuts to be revenue neutral. McConnell is quoted in this Bloomberg article as saying “What I hope we will clearly avoid, and I’m confident we will, is a trillion-dollar stimulus.”

On the flip side you have prominent Democrats offering to work with Trump on a large infrastructure bill. Both Elizabeth Warren and Chuck Schumer have been quoted as willing to work with Trump on infrastructure although in a vastly different form then Team Trump’s current proposal.

It looks like the new Trump administration is going to be split into two camps. The Steve Bannon/Steve Moore infrastructure spending camp and the McConnell/Ryan no new spending camp and any large infrastructure spending bill will likely need Democratic votes to pass.

I’d say the market may have gotten a little bit ahead of itself when it comes to expectations of the new Trump administration.