Dow hits 20,000 in a Trump bull market
Executive Actions to re-start pipeline talks trigger gains, says Meyer
The Dow Jones 30 Industrials stocks topped 20,000 for the first time today -- with aircraft maker Boeing and construction-equipment maker Caterpillar leading the way -- on investors' happy reaction to President Trump's early pro-profit policies, James M. Meyer, principal at Tower Advisers in West Conshohocken, tells clients of Boenning & Scattergood in a note this morning.
"Despite the tweets and harsh sound bites, the Trump team understands that no one expects (factories for) televisions or shoes to suddenly come back home. He also understands that if we put taxes or tariffs on imports, our trading partners will react in obvious ways to stifle the export of American products...
"Trump's behavior is always to stake out an initial position and then move back toward the center. His message of the past three weeks is clear: He doesn't want to see General Motors... build a plant in Mexico, for instance, that will ship most of its production back into the U.S. He is not saying that GM can't build a plant in China to sell cars in China...
"If Trump renegotiates NAFTA to provide substantially less incentive to build in Mexico to ship to the U.S., then corporations will react accordingly. They are not altruistic entities; they understand the bottom line...
"He views the restructuring of NAFTA as the way for Mexico to pay for his wall. Today, there will be another order signed to reallocate money to start building the wall. This is more about his messaging to Mexico than it is an actual start of a huge wall across the entire border, something that almost certainly will never happen...
"Part of what's going on is going to be abrasive and unsettling. But it is important as investors that we don't get lost in the noise and lose focus on the economics...
"Moving a few big plants and building a couple of large pipeline projects are symbolically important but, by themselves, won't move the economic needle...
"If the U.S. is to grow faster, it would be logical that the value of the dollar would rise (and discourage U.S. exports. But) as stock prices and interest rates here have moved generally higher in recent weeks, the dollar has retreated almost 4%" as other economies revive, too. So "it isn't a slam dunk that rising U.S. growth means a higher dollar...
"Trump's base is Middle Class America. Many don't pay a lot of income tax. Cutting the top rate to 15-20% won't impact them, but a big border tax that forces the price of imported products higher would hurt... Some adjustments are likely along the way."
(Note: Last year I charged a speaking fee for moderating an event sponsored by Meyer's firm. Despite this, a lot of his points make sense, and I plan to continue quoting him. Joe D)