What we should be calling the stock rally

(May 26): Although they are from perfect, labels play an important role in providing shorthand signals for bigger phenomena. This, in turn, influences how people think about the past, present and future, and which actions would be warranted and why.

I would argue that the impressive ongoing stock market rally is such a case and that the various labels being attributed to it have different implications about its dynamics, determining factors, and how investors should think about positioning their exposure.

Some continue to call the latest phase of the impressive run in stocks the “Trump Trade.” Its fuel comes from what is deemed as an unusually pro-business administration and its promises to implement measures that would directly benefit companies’ bottom line (such as tax cuts, deregulation and cheaper repatriation of cash held abroad). The beneficial impact on investment sentiment is reinforced by the administration’s stated intention to reform the tax code in a pro-growth fashion and to implement an infrastructure program.

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