While most of the coverage of the post-election rally in U.S. stocks is centered on the possibly bullish legislation for the markets that will take place during the upcoming Trump administration, this is only part of what is behind the rally. Corporate earnings on S&P 500 stocks increased year over year in Q3 2016 for the first time since Q1 2015 - after five consecutive quarters of declines. The original consensus for Q3 was that earnings would be down by 2.2%. Instead, they rose by 3.2%. Comparable earnings growth is now being projected for Q4 2016 as well. If the rally is to continue upward, earnings growth must continue going forward.
While a promise of less regulation from the Trump administration is generally favorable for stocks, there are few specifics of what potential legislation would include. Even if those specifics existed, that wouldn't mean all of them would be enacted… Read More …