For real-time odds on the stock market’s faith in President Donald Trump, look no further than recent weakness in industries most closely tied to his proposed policies: banks, builders, and retailers.
We’re nearly 100 days into Trump’s presidency, and the campaign promises of infrastructure spending, tighter restrictions on trade, and lower taxes have yet to materialize.
Additionally, Trump’s first major legislative push, the American Health Care Act, failed to garner enough support among Republicans and was pulled from the House floor minutes before a vote.
The defeat on healthcare has led investors to worry that Trump’s dealmaking may not be enough to advance his policies through Congress.
The market has not missed this lack of progress. Sectors that would theoretically benefit from Trump’s policies, like industrials, have given back a chunk of their postelection gains, while those that would be hurt, like retail, have recently gotten a boost. These moves appear to be investors telling the president they haven’t seen enough progress.
Even financials, the golden child of the S&P 500 postelection rally that reached as high as 12%, have faltered of late. The same goes for companies that pay the most taxes. A quick glance at trading over the past couple of weeks shows investors are listening to the heavyweights who are now doubling as stock market naysayers.
Here’s a further breakdown of the four areas serving as bellwether indicators for the health of the flagging Trump trade:
Investors are beginning to doubt Trump’s plans to pass a tax cut that is the “biggest since Ronald Reagan.”
The most highly taxed stocks in the US enjoyed a double-digit rally following the election on expectations that Trump would lower the corporate tax rate. During the campaign, the president suggested lowering the rate to 15% from 35%, a cut that would have an outsize impact on companies paying the most.
Since the election, however, Trump has backed off his 15% goal, telling manufacturing CEOs on February 9 the new rate would be “15% to 20%.” Additionally, reports suggest that the tax plan could end up with a corporate rate as high as 28%.
Also, Treasury Secretary Steven Mnuchin originally set a deadline of August for the tax overhaul, but Trump, Mnuchin, and top economic adviser Gary…