Despite a major selloff on Wall Street that accelerated Monday, the stock market remains sharply higher over the past year, driven in part by optimism over Washington’s economic policies.
The Dow Jones Industrial Average, which tumbled about 1,841 points in two days, maintains a 22.4% increase since President Trump took office on Jan. 20, 2017. The S&P 500 and Nasdaq Composite are up 16.4% and 25%, respectively, over the same period.
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President Trump, who gave a speech in Ohio on Monday to tout the benefits of tax reform, has pointed to the record run in U.S. equities as evidence that optimism was running high in the wake of a $1.5 trillion tax-cut package. In a statement following the market’s sharp selloff Monday, the White House said President Trump’s focus is on “long-term economic fundamentals, which remain exceptionally strong.”
Bob Doll, chief equity strategist at Nuveen Asset Management, told FOX Business’ Liz Claman on “Countdown to the Closing Bell” that Wall Street’s historic one-day retreat, which featured a 1,175-point drop for the Dow, reflected technical not fundamental challenges in the market.
“This economic cycle is far from over,” Doll said.
Commonwealth Financial Network Chief Investment Officer Brad McMillan noted that fundamentals are still strong. The U.S. economy is growing, consumer and business confidence is high and corporate earnings are robust.
“We have never gotten a sustained bear market under these conditions,” McMillan said. “This is a confidence-driven decline.”
Analysts have lifted their first-quarter earnings estimates for S&P 500 companies at a record rate. Corporate earnings are on pace to grow 17.7% in 2018, according to estimates compiled by Thomson Reuters.
Concerns over rising inflation and the Federal Reserve’s timeline for interest rate hikes fueled Wall Street’s downturn Monday. Investors are cautious that stronger wage growth is a sign that higher inflation is around the corner. A better-than-expected reading on January job gains also raised the possibility that the Fed could hike interest rates faster than anticipated. Low interest rates and moderate inflation have helped support the record-breaking rally in stocks over the past year.
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