The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s health-care bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth.

Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a health-care bill a litmus test which could give stock investors another reason to sell.

“If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital.

While health care stocks will be affected by how the health care bill turns out investors are more interested in the lack of progress on economic issues. After all the reason for the Trump post-election rally is the promise of tax cuts, repatriated offshore corporate cash and money poured into infrastructure repair. And if Trump and the Republicans who control congress cannot deliver on their first promise to repeal and replace the Affordable Care Act how will they do on the economic issues?

Is the Market Overpriced?

The concern about Trump’s economic agenda is that investors are pricing stocks based on perfect performance of the new prez and his Republicans. If these guys don’t deliver how painful will it be? That depends on how overpriced the market is. Forbes asks is the market expensive? They offer two sides of the argument.

“Frothy.” “Pricey.” “Stretched.” These are among the adjectives used to describe the stock market-and they’re not even the most ominous.

Nobel Laureate Robert Shiller recently told Bloomberg he believes the market is “way overpriced” and that the current elevated CAPE ratio of 29 is a “bad sign.” John Hussman, president of the mutual fund Hussan Investment Trust and a Ph.D. in economics from Stanford University, argues that the market may be due for a hefty correction. In Fortune this month, he was quoted as saying that the current market environment is in “the most broadly overvalued moment in market history” and that investors shouldn’t expect much in the way of equity returns.

Interestingly Warren Buffett disagrees.

Warren Buffett not only believes that the U.S. stock market is a good bet, he declared in a recent CNBC interview, “If there’s a game it’s very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it-is a terrible mistake.” Buffett is steadfastly confident in our country’s economy and its ability to overcome adversity.

How is it that Buffett who famously says to buy when everyone else is leaving the market and sell when everyone else is buying is jumping into stocks so heavily right now? It has to do with the time frame. Buffett gets into stocks for the very long haul. Recently we asked how long does it take to make an investment long term. Ten years and longer is the answer. So Buffett trusts American business and the stock market and says that staying out is mistake. Nevertheless he is a firm believer in intrinsic stock value. What will happen if the market corrects on the basis of Trump’s failure to deliver on his economic agenda? Buffett will probably buy more stocks.

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Since 1950, the market has logged only 21 other instances when the index traded without a 1 percent down day for 70 or more consecutive trading days, Johnson wrote in a recent report. The longest streak was in 1963, when the S&P 500 saw 184 straight trading sessions without a decline of 1 percent or more.

Interestingly enough, the S&P 500 in these 21 relatively quiet periods has generated average returns of 13.9 percent over the next year, with 85 percent positivity rate.

Long term technical analysis of this sort indicates a better market going forward than the apparent chaos in Washington might imply. In our article about why airlines are a better investment than they used to be we looked at why airline profit has little to do with Washington.

None other than Warren Buffett, who called airlines a death trap for investors, has poured $10 billion into the four major airlines in the last couple of years. Why are airlines better investments than they used to be?

Fewer airlines, lower fuel costs and more efficient operation are helping airlines make money and be better investments. None of these factors has anything to do with Trump’s tweets, congress repealing Obamacare or Russians hacking the US political process. On the other hand a trade war could be devastating for airlines and it would appear that the market does not see one coming. What do you do now if the market will be up next year?

Is It Time to Buy?

Folks who were badly hurt by the 2008 crash have been hesitant to reenter the market and have missed out on the rally so far. The Washington Post has a suggestion if you’re missing out on the stock market rally.

Investors have not been this bullish about the stock market in 30 years, according to a recent survey of market professionals done by Investors Intelligence, an investment research firm.

But this kind of euphoria can also make some investors nervous about what will come next. Are the recent highs a sign that the market is nearing a peak and ready for a tumble? (The last time investors were this optimistic was 1987, the year of the infamous “Black Monday” market crash.) Or is this simply the market breaking new ground as part of a long-term rally?

The jury is still out.

But in the meantime, investors looking to buy more stocks can take the guesswork out of the equation by spreading out their purchases over time, financial advisers say. “The biggest mistake I see investors make is they have an all-or-none mind-set,” says JJ Kinahan, chief market strategist for TD Ameritrade.

Low volatility may well be predicting a positive market going forward. And getting in bit by bit may well be a good idea. This market may well end up like the rest with a crash but if you stay in over the years you will tend to make money as the American economy grows.

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The S&P 500 and Nasdaq both broke record highs last week (Jan. 6) as the Dow nears a record 20,000 points. But with stocks soaring, the possibility of a stock market crash coming is on the rise, too.

The stock market crash of 1929 was brought on by a stock market bubble.

Simply put, investors bought up stocks because they thought the markets would only go up. This led to investors taking risks they couldn’t afford to.

Amateur investors borrowed $8.5 billion (in today’s dollars) to buy stocks with. As long as stocks kept going up, everyone was making money. And as long as more people were buying stocks, prices continued to soar.

But when prices began to fall, these investors were forced to sell, sending prices in a downward spiral.

The collapse of the stock market led to an 86% drop in the value of the Dow between September 1929 and June 1932.

The same thing happened with the dot com bubble and the 2008 market crash. Initially there are good fundamental reasons to invest in undervalued stocks. And then stocks outrun their fundamentals but keep rising in price. Over-enthusiastic investors keep buying simply based on a rising market. This is a recurring theme. So, how do you prepare for the next stock market crash? What do you watch for?

Will Supply Side Economics Work This Time Around?

In the 1980’s supply side economics helped drive the economy and market to new highs. The same approach did not work out so well in the first years of the new millennium as witnessed by the market crash and Great Recession of 2008. The New York Times writes about how Trump can’t make it 1981 again.

Indeed Mr. Trump’s advisers say that over the next decade, their plans for tax cuts and deregulation could push the average annual growth rate back up to 3.5 percent – the same as during the Reagan presidency. Mr. Trump says the country can grow even faster. His backers dismiss skeptics as defeatists and have insisted there is “no law of nature or economics” that would prevent the United States from reviving the boom of the 1980s.

Only there is such a law. The forces that underlie economic growth have weakened significantly since the Reagan years, worldwide. No nation, no matter how exceptional, can try to grow faster than economic forces allow without the risk of provoking a volatile boom-bust cycle.

For those who are still pouring their money into the stock market this article bears reading. Population and productivity per worker are the factors that drive growth. In the 1980’s both population and productivity went up at about 1.7% a year and the economy grew by 3.5% a year. The US population today is growing by 0.7% and Trump wants to deport workers (illegals) which would reduce the already low growth rate. Trump supporters say that his other measures such as bringing corporate cash back to the USA will easily double the productivity increases of the 1980’s. What happens when repatriated corporate cash is used for takeovers and not to create jobs? Our suggestion is that to prepare for the next stock market cash you increase your cash position and look at stocks like Johnson & Johnson that do well no matter which way the market is headed.

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Rising bond interest rates are sapping the popularity of high-yielding stocks.

For the first half of the year, the S&P 500 sectors most sensitive to interest rates seemingly traveled in only one direction: up, drawing both institutional and mom-and-pop investors to the stock market to buy telecom, utilities and real estate investment trusts, known as REITs. The appeal was their high dividend yields.

But in keeping with Isaac Newton and his theory on gravity, the darlings of the 2016 markets have fallen back to earth.

Rising interest rates explain the faltering of dividend stocks but what else is going on?

Is There a Trump Speed Bump Ahead?

The stock market anticipates gains and losses in stock prices. CNN Money writes about a potential speed bump for the stock rally.

Trump’s victory led to an explosive rally in stocks of financial, health care and industrial companies.

Investors are betting Trump and the Republican-led Congress will roll back some Wall Street and health care reforms put in place under President Obama, cut taxes and approve $1 trillion in stimulus for roads, bridges and other infrastructure.

But has the stock rally gone too far too fast?

It may be that the so-called Trump bump has already eaten up potential gains for 2017. For the market to maintain and move ahead next year the market needs to perform despite higher interest rates. Trump needs to deliver on his promises which will mean making congress go along. And we all need to hope that the new president does not start a trade war that extinguishes global as well as US economic growth.

A Voice of Concern from the Heartland

Mr. Trump won the election despite winning less than half the votes because he dominated in states across America´s heartland. Now the same folks who voted for him are concerned about the price of a trade war with China. The Delta Farm Press discusses the issue.

The late President Dwight Eisenhower had a sign in his office on his farm in Gettysburg, Pa., that said: “Farming looks mighty easy when your plow is a pencil, and you’re a thousand miles from the corn field.”

The same might soon be said about trade negotiations, a subject that could play an increasingly important role in whether U.S. farmers are able to enjoy higher prices for their crops in the near future.

Trump named Peter Navarro, author of the book, “Death by China,” and a frequent critic of China’s economic policies, to head the newly formed White House National Trade Council, removing any doubts that he intends to take a tough stance on relations with China.

The two primary objects of retaliation by China in a trade war would be the two largest exporters, Boeing and U.S. agriculture. The agricultural states in the heartland are the ones who voted Trump into office. What is happening to the stock market rally is that investors may be waking up the concerns of farmers, Boeing and defense contractors who seem to be on Trump´s hit list.

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