We all are aware of the stock market at/near all time highs, a stunning run post-election.  President Donald Trump has taken some (most?) of the credit for a surge in stock prices, but is it all due to his election?  We can certainly say sentiment has improved since the election results were rendered, but there were other things happening that also deserve credit for that strong move upward in the stock market. 

We should start by stating the obvious - a potential for strong fiscal stimulus to the economy, something not seen in years.  During the Obama years any attempt for growing the economy were either misguided or thwarted, and little progress was made beyond the heavy monetary support provided by a generous Federal Reserve (Fed).  The proof is in the numbers, an economy growing at far less than its potential with little inflation.  The Fed had fought a long batter against deflation, trying to stimulate with increased liquidity to boost lending, but it didn't happen as planned. 

Yet, when the new President was elected with big, bold plans and a Republican Congress/Senate there was hope we would see something meaningful on the fiscal front - finally.  That is yet to happen, but given Mr Trump's bold agenda (reform healthcare, tax reform, infrastructure projects) and aggressiveness there is a much better chance than ever before.  Some important changes have already occurred within the first 100 days.

However, late last year there was a turn in earnings, and that is probably more the reason for stock market optimism.  For several quarters our companies were mired in an earnings recession, downward revisions amid challenging conditions (regulations and other restraints).  But as we witnessed in Q3 2016 that recession started to end, earnings pivoted upward and are now going higher for the first time in a few years.  It may not be much now, but the trajectory is for earnings growth, and with fiscal stimulus in play there is room to be optimistic. 

The stock market is a forward-looking indicator, and hence views future earnings gains, pricing in that growth into current stock prices.  It is one of the most accurate forecasting mechanisms out there, and while the growth in earnings won't last forever this is where good timing is important and considered, even with the stock market is at/near all time highs.  Hence, market players will re-value what a dollar of earnings are worth.

Finally, the question must be asked - would the stock market be up as much if Hillary Clinton had won?  That is something we will never know, however given the turn in earnings late last year and the slow moving economy we would have probably seen the markets higher but probably not with as much spark and enthusiasm.  A Clinton Presidency would have likely encountered the same gridlock as the last few years of the Obama Administration, thereby relaying as much on Fed policy again to carry the economy and markets - for better or worse.
Trump Rally