Can the Donald Trump Rally Continue?

tradestix | March 4, 2021

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It’s a question we’ve all asked.

But while there’s still tremendous excitement of the Trump-abilities (sorry!), we have to consider that the markets weren’t just running on that catalyst.

The other monster catalysts at the time were corporate earnings.

The bad news at the time was that second quarter earnings weren’t likely to match the 15% growth of the first quarter. The good news is every one was giddy over the fact that second quarter earnings were very likely to grow again, marking the fourth quarter of strong growth. That’s important because earnings are more likely to drive growth, than politics.

According to analysts in July 2017, earnings were likely to grow another 6.5%.

That news – coupled with Trump – meant the bull market was alive and well for the eighth straight year. In fact, over the last eight years, we’ve watched the Dow Jones explode 15,074 points. The NASDAQ tacked on 5,001 points. The S&P 500 was up 1,700 points.

And to be honest, the bull market is showing no signs of slowing in July 2017.

In fact, many believed it could continue for quite some time, especially as corporate earnings keep on showing signs of marked improvement. In the first quarter of 2017, for example, S&P 500 earnings were up 13.6%, marking the biggest quarterly gain in nearly six years. And now, analysts believe second quarter earnings could be just as good.

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CSX Corporation for example posted a 2% rise in revenue to $2.93 billion, with an 8% drop in expenses to $1.98 billion. That resulted in net earnings of $510 million, $148 million higher than the previous quarter. EPS soared from 39 cents to 55 cents.

United Health Group reported a 30% jump in second quarter earnings, boosted its full-year earnings guidance, and posted $2.28 billion in earnings on $50.05 billion revenue.

Morgan Stanley topped analyst expectations with EPS of 87 cents on revenue of $9.5 billion, as compared to $8.9 billion year over year. And while companies like IBM managed to post its 21st consecutive quarterly revenue decline, analysts were still optimistic overall.

For the second quarter 2017, S&P 500 companies were expected to post 8% earnings growth on a 4.6% gain in revenues, according to Thomson Reuters, as reported by Investors Business Daily. “That’s a big reversal from a 2.1% profit decline in Q2 2016 as the energy-led earnings slump extended to a fifth consecutive quarter. And it solidifies the comeback that has seen S&P 500 profit growth of 4.3%, 8% and 15.3% in the last three quarters.”

Even better, the third quarter could be just as surprising, according to analysts at the time.

It was all very encouraging, and could very well fuel the bull market for some time.

With corporate growth on a tear, it’s a good bet that we’ll see further market upside.

Lesson learned – it’s not all about the excitement of Trump that’s fueling the rally, corporate Americans seems to have gotten stronger, too.

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