I believe 2017 is going to be an up year in the market. Why?
1. The Federal Reserve plans to raise interest rates. The Fed has said it will most likely raise rates three times this year. You might think that would cause the market to go down: after all, the market likes low interest rates and cheap money, right?
In the short, I think there will be some downdraft. But if you look at history, the market has almost always gone up during cycles of rising interest rates. Why? Because the Fed raises interest rates chances when it sees the economy heating up, and a good economy helps the market to do well. We should also see money rotating out of bonds and into stocks, another boon for the market.
2. Donald Trump wants to reduce corporate income taxes. Corporate stock prices are a multiple of their retained revenue. Trump want to cut corporate taxes from 35 to 15 percent. If a company has the same sales numbers in 2016 and 2017, but its taxes go from 35 to 15 percent, that 20 percent difference goes straight to
its bottom line, and causes the company’s value--and its stock price--to go up.
3. Trump is also talking about repatriation. Some companies have been hiding their money overseas to avoid taxes in this country. If we have a tax holiday (lower taxes), those companies may bring those dollars back to the U.S. I don't think they’ll invest it into the economy, unfortunately, but I do think they will spend it buying back some of their own stock. If they do, that's up to $3 trillion of corporate buybacks. The market should definitely like that.
4. Trump is proposing a huge fiscal stimulus package. The new administration wants to spend a trillion dollars on rebuilding America’s infrastructure. Any time there is that amount of stimulus; the likelihood of a recession is very, very small, which makes the probability of a bear equally as small.