Dr. Ed Yardeni says the Dow Vigilantes will keep the President from becoming a trade warrior. That should keep earnings rising, and stocks should follow.
The flash crash a few weeks ago might have given the bears a reason for living, but it was too short-lived. And here’s another disappointing flash for the bears: The operating profit margin of the S&P 500 rose to a new record high during Q4. It was 11.0% based on Thomson Reuters data and 10.4% based on S&P data. It will be higher during Q1-2018 thanks to the TCJA.
The bears could make a comeback if President Donald Trump turns into an outright protectionist. More likely is that he will back off if the market continues to react badly to his protectionist pronouncements. After all, he clearly prefers the Dow Jones Industrial Average as a measure of his popularity rather than opinion polls. Could today’s sharp stock market selloff on news that Trump intends to slap tariffs on steel and aluminum imports be the incipient formation of the Dow Vigilantes?