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Ron Insana: 'Trump Bump' May Turn Into 'Trump Dump'

Ron Insana: 'Trump Bump' May Turn Into 'Trump Dump'
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By    |   Thursday, 23 March 2017 01:13 PM

CNBC's Ron Insana warns that the recent bull stock market is long overdue for a correction, and there are numerous landmines investors must avoid.

"The stock market is long overdue for a correction, after a scorching rally since the election, and a solid start to 2017. Stocks went 109 days without a 1 percent daily decline, a relatively unusual duration," Insana wrote.

U.S. stocks rallied after the November presidential election, with the S&P 500 posting a string of record highs up to earlier this month, on bets that the pro-growth Trump agenda would be quickly pushed by a Republican Party with majorities in both chambers of Congress.

"There is no doubt the market can fall further amid a variety of obvious concerns," he wrote.

"The "Trump Bump" could turn into the "Trump Dump" if his legislative agenda is derailed," he wrote.

"Granted, it is far too early to make claims that such will be the case, but the president is struggling unexpectedly in his first 100 days in office. The art of the deal is looking a little less artful every day," he wrote.

"Corrections, by their very nature, are short, sharp and scary. And, for now, I suspect the pullback in stocks is nothing more," he wrote. "A 5 percent to 10 percent decline would be normal, indeed, welcomed by those who believe, as I do, that the bull has more room to run," he wrote. 

"Having said that, a big disappointment in Washington, a sudden downturn in domestic, or global economic activity, an aggressive markdown of earnings expectations, or an expansion of militarism could bring about a deeper, and more concerning decline in the stock market," he wrote.

"As has become the norm with this new Administration, investors must take it one day (some would say one tweet) at a time and learn to separate real news from the noise."

Strategists have been cautioning for weeks that markets are pricing in a scenario where nothing goes wrong with Trump's agenda, Reuters reported.

Investors are paying $18.10 for every dollar in earnings expected on the S&P 500 over the next 12 months, near the most expensive U.S. stocks have been since 2004.

"This is really about the fact that the market is pricing in too much certainty on a number of accounts," said Julian Emanuel, executive director of U.S. equity and derivatives strategy at UBS Securities. "Even if you got the positive vote, there's still the residual knowledge that the agenda will be difficult to get through the Senate."

While investors and strategists have said they do not see an immediate threat to the eight-year-old bull market, there is a risk of a 5-to-10 percent drop. Only a bear market -a 20 percent decline- would put an end to the bull.

"It looked like a mini tantrum," said David Kotok, chief investment officer of Cumberland Advisors. "Trump has made the House vote his own now so he has a lot at stake. My guess it will pass the House. If not, markets will be shocked and it won't be pleasant."

Michael Arone, chief investment strategist at the US SPDR Business at State Street Global Advisors in New York said that it the healthcare bill fails, "a correction of 5 percent is not unreasonable given how far we’ve come in such a short period of time."

(Newsmax wire services, Reuters and Bloomberg news contributed to this report).

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CNBC's Ron Insana warns that the recent bull stock market is long overdue for a correction, and there are numerous landmines investors must avoid.
ron insana, trump, market, investors
Thursday, 23 March 2017 01:13 PM
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