To quote President Trump’s Truth Social post, “Congratulations America” on Dow 50,000.
And the widely known index didn’t just crawl above 50,000, it rocketed by 1,100 plus.
And all those techie moaners and groaners have had their day in court, but they lost because they were up almost 2 percent and the broad based S&P is up almost 2 percent.
There’s always a frothy selling period, kind of a cleansing. And it’s healthy. Yet as I’ve believed for so many decades, you buy stocks for the long run. You buy the indexes or the ETFs and you hold them for the long run. And right now we have a market which is backed by very strong fundamentals.
Yes, that’s right, profits are the mothers’ milk of stocks. And profits are strong. Future earnings estimates continue to show double digit profit gains. And this is a productivity-driven profitability,
where unit labor costs are barely above one percent, that is wages minus productivity.
It’s a decent proxy for low inflation and for that matter, for the whole Trump economic boom.
The success of the One, Big, Beautiful Bill of tax cuts, deregulation, “drill, baby, drill,” and reciprocal fair trade, is backing up the stock market.
There’s a business investment boom, called capital deepening, which is driving up productivity and real wages for middle class working folks.
And please remember there’s something like 135 million Americans invested in stocks, through 401ks or IRAs, or brokerage accounts, or even union pension funds.
And hopefully the success of the Trump savings accounts for newborns will create a generation of children who will come to appreciate not only the workings of the stock market, but also business and the entire economy and for that matter free-market capitalism.
From poverty to millionaire status, it’s all very possible. Treasury Man Scott Bessent spoke about it earlier today, noting that “Trump accounts are a generational down payment on the American dream.” He added that “each eligible American child will receive a $1,000 seed contribution invested in the U.S. stock market, giving them a tangible stake in the most powerful economy in the world.”
Mr. Bessent concluded: “As children see their the accounts grow, they learn how markets work, how patience pays off, and how financial stability builds independence”
Part of today’s stock market rally could be traced to the third straight increase for consumer confidence and a six month high.
I’m not crazy about that survey because it’s heavily weighted to Democrats. Yet maybe some of them have seen the light and will stop bellyaching about tariff inflation, and other economic evils that have not come to pass.
And even more, a good piece by Kim Strassel at the Wall Street Journal notes a sizable reduction on the outlook for a federal budget deficit.
The Office of Management and Budget director, Russell Vought, is re-estimating a near $12 trillion reduction in the deficit outlook.
That includes $2 trillion from the One, Big, Beautiful Bill, and $5.6 trillion attributable to 3 percent or better economic growth. There is also $290 billion from tariff revenues in 2025, which comes to $4 trillion over 10 years. And all of that reduces interest expense by $1.8 trillion.
So anyway the spending curve is starting to come down for a change.
It’s all good and it’s all captured by a roaring stock market.
Congratulations, America. Enjoy it.
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