The Trend

Dow 22,000 is No Longer a Fantasy

On Tuesday, all seemed grim. 

After 12 straight days of rallying, we closed down. 

CNN was quick to note, “Dow’s ridiculous string of records finally comes to an end.”

The Hill reported, “Wall Street sees Trump rally coming to an end.”

And then it happened. Just hours after President Donald Trump delivered his speech we hit all-time highs of more than 21,000 – up 240 points at opening bell Wednesday.

The last time we saw a 1,000-point gain that quick was in May 1999 in 24 days, as we first passed by 11,000. Dow 20,000 was taken out in 42 days.

Dow 22,000 could be even quicker with a rally that refuses to fade.

All thanks in part to Trump’s Tuesday night speech. 

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While many believed the speech to be reserved with regards to U.S. economic growth, comments on infrastructure were well received. In fact, the President noted:

"America has spent approximately six trillion dollars in the Middle East all this while our infrastructure at home is crumbling. With this six trillion dollars we could have rebuilt our country --- twice. And maybe even three times if we had people who had the ability to negotiate.  To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States -- financed through both public and private capital --- creating millions of new jobs."

Such efforts would improve tunnels, roads and bridges, as well as helping to create millions of new jobs with the core principal note being, “Buy American, Hire American,” he noted.

Then, he promised “massive tax relief” for the middle class, as well as tax cuts for corporations – which is great news for small cap stocks.  At the moment, many small companies have a tax rate of 32%, as compared to 26% for S&P 500 companies. That’s because they have less exposure to international tax havens. 

That means that if Trump is successful in pushing for a reduction in the corporate tax rates, small cap stocks have a lot to gain. 

Meanwhile, large cap stocks with an international focus could be negatively impacted by attempts to renegotiate global trade agreements, including a withdrawal from the Trans Pacific Partnership. Others could find themselves subject to penalties if new laws are enacted to discourage business outside of the U.S.

It’s never a good bet to count this rally out, as CNN foolishly did. See you at 22,000.