If Trump is so bad, why is the market doing so good?

It sure looks and feels like a bull market. The S&P 500 Index set 25 new all-time highs through the first half of this year, and never once had a pullback or drop of as little as 5%. After 15 years of tough times for stock markets, are we finally returning to the halcyon years of the Reagan, Bush & Clinton administrations?

Well, certainly not in Washington DC. I have been alive since Eisenhower was President and I do not remember ever a newly elected President with such a disruptive demeanor. I have compared Trump to Jackson, and I have heard comparisons to Carter, and while they were both seen as outsiders, they both held public offices and served in the military before their election to the Oval Office.

Political chicanery aside, the economic and investing climate may be on the brink of some promising years ahead. All the twittering emanating from the Capitol may be distracting public attention from one underlying truth about Donald Trump.

He disdains regulatory overreach, and his administration is doing its best to unwind it. What’s getting overlooked is that regulations are unraveling faster than Trump’s approval rating.

The President controls the executive branch, and for the most part, functions day-to-day without interaction with the judicial or legislative branches of government. Within the branch, he is the boss, not dissimilar from the CEO of private business. The American people elected Donald Trump largely based on his perceived acumen as a businessman, and they want him to take charge.

“According to Barron’s magazine, the 61,000 pages of regulations expected in 2017 is nearly 40% fewer than were created in 2016 (i) and a number consistent with the regulatory volume of the Reagan-Bush administrations (ii).”

(i)   Trump’s Secret Weapon: Deregulation

(ii)  http://www.llsdc.org

Now don’t get me wrong. Regulations and regulators serve an important purpose. They exist to keep businesses from behaving badly, much like the presence of traffic cops tends to keep otherwise good people from doing stupid things.

Before the Great Depression, economic cycles were divided almost equally between booms and busts. Five of the worst downturns were labeled panics: 1797, 1857, 1873, 1893, 1907. However, rules and regulatory agencies created during the Roosevelt years helped smooth out the cycles, dampening the bust periods while lengthening the expansions. The Great Recession of 2008 was the first labeled a panic in over 100 years.

Like most of the panics of old, by improperly regulated new financial instruments and unfettered land speculation characterized the contemporary panic. Unfortunately, the government’s heavy regulatory response to the new instruments and markets spilled over into sectors where lesser problems called for a lighter touch. Rather than keeping otherwise good businesses from behaving badly, the attitude was that all business misbehaves and must be controlled.

Imagine a ball game where every play gets reviewed or results in a penalty.

The players avoid taking chances.

The fans start crying “let them play.”

The game slows down.

That is what happens to business under the pressure of unnecessary regulations and heavy-handed interpretations of the law. Business-building activities, such as marketing, sales, product development, and customer service get less attention because an outsized portion of the work day is consumed satisfying regulators’ demands.

President Trump lacks many of the skills of the professional politician. However, to business, consumers, and especially small business people, he appears to be draining Washington’s regulatory swamp. The extent to which he succeeds will likely have a huge impact on returning the economic climate to one of sound decision-making and healthy competition.

As always, please call or email to learn how we can help you position yourself to pursue your financial and life goals better.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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