Trump’s Not Worried – But This Chart Shows Investors Might Crack

Say what you will about Trump’s executive order banning immigrants and refugees from seven predominantly Muslim countries…

It’s pushing the “protest economy” to new highs.

People filled city squares and the international terminals of many of the country’s major airports over the weekend to rally against the executive order. Even our own Baltimore-Washington International saw its terminals stacked with protestors—presumably to welcome the folks arriving from Aruba and Toronto (since there were no flights arriving from the banned locations).

Either way, some people are pissed off right now. After Trump’s busy first week in office, his net approval rating has already dropped 8 points, according to Gallup. The number of folks who disapprove of the job Trump is doing has risen above 50%.

Meanwhile, the markets are quiet.

Perhaps a little too quiet…

At the Rude, we know that investors vote with their wallets. So a quick glance at the Dow should tell us everything we need to know…

The major averages posted all-time weekly closing highs despite a small slip heading into the weekend. With all the policy shifts enacted by the new administration, most investors were expecting a rocky road after the inauguration.

So far, we’ve seen the exact opposite.

Instead of a spike in volatility, the Wall Street Journal notes that on Friday the VIX hit its lowest level since 2007. That’s right—the fear gauge is showing nothing but complacency. Meanwhile, the US Economic Policy Uncertainty Index is rocketing higher…

Read any analyst report. Talk to a financial reporter. Heck, you could even go and bother your nosy neighbor.

The analyst will explain why he rates a stock a buy or a sell. The financial reporter will regurgitate old GDP numbers and try to figure out what it means for stocks. Your neighbor will say that he’s thinking about getting back into the market once the news quiets down.

But they’ll all end the conversation with the same caveat…

It all depends on Trump.

President Trump is a wildcard. Even seasoned market watchers don’t know what to make of his first week in office…

“The story will likely run and run, but will the impact of it spill over into financial markets or will they purely look at the economic implications of a Trump victory and other wider macro issues?” Deutsche Bank’s Jim Reid asks this morning (via MarketWatch).

Reid is one of those who believe we’re about to see some degree of volatility spike sooner rather than later…

“It just seems that there are too many uncertainties, unknowns and major policy changes attached to a Trump presidency for it to be a smooth year,” he says.

Of course, markets are rarely a smooth ride.

If Trump demonstrates he can stay on track, the markets are signaling they’ll be just fine. But if he gets distracted… trouble could come knocking.

Remember, despite what everyone told us back in November, a Trump win wasn’t the biggest threat to stocks. This past week has proven that folks are still coming to grip with the reality of a Trump presidency even as stocks dash to new highs.

The markets are already one step ahead of the crowd. Our only shot at thriving in a new era of Trump uncertainty is by doing what we always do: Only allow price to guide our trading decisions.

Sincerely,

Greg Guenthner
for The Daily Reckoning

The Daily Reckoning