The ‘Trump bump’ is fading – but consumers can push the stock market even higher

On By Littum

Shares softened this past week after moving to record highs following Donald Trump’s election victory. The initial “Trump bump” may be fading as expectations of juicy corporate earnings – thanks in part to deregulation and lower tax rates – are increasingly being priced into the market. Election results aside, however, one prominent portfolio manager likes what she sees of the U.S. economy and, most importantly, American consumers.

Economic data regarding GDP growth and inflation are pointed to right directionsaid Stephanie Link, chief investment strategist at Hightower Advisors Assets late last week. While opinion polls suggest economic dissatisfaction played a massive role in driving Trump’s return to the White House, there are signs that the general mood is improving.

“You have this consumer that’s just adamant,” Link said, “and a lot of that is because they have jobs, they have wage growth that’s higher than inflation — at least today — and they’re spending.”

In many ways, the election results proved to be a positive catalyst for the markets simply because they resolved an unknown, she added. The S&P 500 posted its best post-Election Day session ever, with the index up more than 3.5% in the second week of November. $56 billion flowed into US stocks through November 13, according to strategists at Bank of Americausing data from EPFR Global which was quoted by Bloomberg.

Link noted that the Federal Reserves quarter point cut to interest rates, along with news of China’s $1.4 trillion spending package, addressed other sources of uncertainty.

“We all breathed a sigh of relief,” said Link, who manages a $5.2 billion stock portfolio and is a regular CNBC contributor.

The mood on Main Street also appears to be improving, although many Americans remain wary of higher prices. On election day, the purchasing managers’ index, a benchmark target of economic activity, hit its highest level since July 2022. A reading above 50 is considered expansionary; last month’s Services PMI, as it’s commonly called, registered 56%, up 1.1% from September.

“Two and a half years ago, we were just coming out of COVID,” Link said, “so you could understand why services would be so strong. Fast forward to today, the consumer still wants experiences. The consumer still spends.”

However, Trump’s victory illustrated that many Americans do not share a similarly rosy view. About 40% of voters considered the economy and jobs to be the country’s biggest issue, according to to Associated Pressand the electorate overwhelmingly supported the Republican nominee to return to the Oval Office.