US President Donald Trump’s love affair with Wall Street is, to use the social media phrase, "complicated".
On the surface, the love birds are smooching up a storm. When Trump delivered his intemperate inauguration speech in January, US stocks responded by hitting a record high, pushing the Dow Jones index through 20,000 points for the first time ever.
The bet appears to be a simple one: Trump is promising huge infrastructure spending to deliver jobs and opportunities to his middle-American base. And he plans to cut the red tape that has held the big financial houses in check, unleashing a flood of lending that has been dammed by Barack Obama-era regulation.
The love affair is personified by the raft of Goldman Sachs bankers who populate the corridors of the White House. Leading the pack is treasury secretary Steven Mnuchin, who wants to roll back Obama’s post-financial meltdown Dodd-Frank Act.
The Dow rose 9% between the presidential election and the inauguration. Goldman Sachs’ share price rose 29% in the same period, Fortune reported. Nuff said.
By this week, the Dow was trading at 18 times forward earnings compared with the average of 15 times, Reuters reported.
The "complicated" part is that Trump has also proposed policies that threaten to dampen economic activity.
And the economy, while trundling along nicely, does not seem to back up the high valuations.
It’s all good and well to talk up a "wall" between the US and Mexico, and to humiliate US companies that build factories there. But it’s another to accept the damage that will come about should Mexico — or, worse, China — tighten trade terms in retaliation.
And then there’s the fact that Trump could derail confidence with a midnight tweet.
"The market is susceptible to short-term swings and choppy behaviour predicated on something Trump says," Andre Bakhos of Janlyn Capital told Reuters.
For now though, the cuddling remains intense.