Value Investing and the Trump Growth Agenda

Focus: STRATEGIES

Kelley Wright Image Kelley Wright Managing Editor, Investment Quality Trends

The narrative that has developed since the election has become known as the “Trump Growth Agenda,” observes dividend and value investing expert Kelley Wright, editor of Investment Quality Trends.

The primary thesis of the Trump Growth Agenda is there will be an economic explosion because of the fiscal stimulus provided from health care reform, corporate and individual tax reform, and significant infrastructure spending.

“Economic explosion” on Wall Street means increased earnings and profits. Now apply an appropriate “market growth multiple” to those increased earnings and you get higher stock prices.

It is important to remember that the above is a thesis that has yet to be proved. Of course, the stock market hasn’t waited around for any proof, that isn’t what the stock market does.

The stock market moves on what it thinks will happen, and deals with the outcome, or lack thereof, later. In other words, the stock market makes a lot of guesses, some of which prove to be good, and some not so much.

I mean seriously, if you were going to buy  a business on Main Street, would you do so because you guess it might be profitable? I forget the proper attribution but I recall a quote that suggests something akin to “a fool and his money are soon parted.”

Indeed, in a roundabout way, I have managed to arrive at my point: Investing is not about guessing the direction of a market or a stock’s price, you invest in companies to participate in their growth, which you realize through a return on your investment.

If you put money into the stock market for any other purpose you are merely speculating, or guessing if you prefer.

Don’t get me wrong, I think it is great that the stock market is up about 10% since the election.

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