Trump Rides a Market Wave, but Business Looks for Results

Traders at the New York Stock Exchange on Monday after a day of gains. Many in business are concerned about the trade-offs a 15 percent corporate tax rate could entail.

The investor enthusiasm that began with President Trump’s unexpected victory in November has burst out anew on Wall Street, even as Washington remains gridlocked and evidence of any real pickup in the economy is scarce.

Stocks have surged 5 percent since Mr. Trump took office on Jan. 20. And that is on top of the 6 percent rally that followed his win in November.

The cause for bullishness on Tuesday was Mr. Trump’s new call to cut the corporate tax rate to 15 percent, from 35 percent — deficits, perhaps, be damned.

“C.E.O.s are pragmatists,” said Bill George, a Harvard Business School professor who formerly ran Medtronic, the giant medical-device maker. “If you cut my taxes and ease up on regulations, then I will like you. The bigger question is, can he get anything done?”

The market impact of the Trump presidency is based so far on prospects — with details and congressional dynamics left to be sorted out — rather than accomplishments.

But plenty of other factors are providing a tailwind for traders, including unexpectedly strong earnings reports from blue-chip companies like Caterpillar and McDonald’s and the receding chances that French voters will turn their backs on Europe.

Technology giants like Apple, Facebook and Amazon have shown robust growth, lifting the Nasdaq index past 6,000 for the first time on Tuesday, a 26 percent gain from a year ago.

Blair Effron, a founder of Centerview Partners, a prominent independent investment bank on Wall Street, said he believed that beyond any immediate policy shift in Washington, investors had taken their cue from signs of healthier growth globally.

“Europe and emerging markets are doing better,” Mr. Effron said, “and there is an underpinning of global stability and growth that are having much more of an impact than people think.”

Not all the signals domestically are coming in strong, however. The government’s initial report on the economy’s first-quarter performance is due Friday, and it is expected to be weak.

And even if Mr. Trump manages to get Congress to pass a tax overhaul, and corporate profits then boom, that will not necessarily translate into better overall economic performance, warned Diane Swonk, a veteran independent economist in Chicago.

“We have to distinguish between pro-profit and pro-growth policies,” she said. “A pro-profit approach increases the share of the pie going to corporate earnings and shareholders. Pro-growth policies increase the size of the pie.”


Shoppers last month in Herald Square. “A 15 percent tax rate would be a huge win for our members,” said David French, of the National Federation of Retailers. CreditJohn Taggart for The New York Times

So far, Ms. Swonk said, the Trump administration seems to favor the former. And while Wall Street will always reward rising corporate profits with higher share prices in the short term, the country’s long-term prospects will be undermined if that trend is not accompanied by policies that lead to faster economic growth.

“It’s easy to cut taxes, but reform is harder,” Ms. Swonk said. “It’s more about closing loopholes than reducing rates because if you just go to 15 percent, you’re going to leave a large hole in the federal budget.”

While the prospects for a tax overhaul are murky on Capitol Hill, especially in light of the failure of House Republicans in March to agree on a replacement for President Barack Obama’s signature health care law, executives say they are encouraged by the business-friendly stance of the White House.

Bruce Van Saun, chief executive of Citizens Financial Group, said he was initially concerned by Mr. Trump’s pronouncements on trade and immigration when he took office in January.

“I feel better because in the first 100 days, the president’s tone on those issues has moderated,” Mr. Van Saun said.

At the same time, executive actions, like requiring government agencies to roll back two existing regulations for every new one, have also played well with business leaders, especially in the financial services industry.

“That’s caused some of the regulatory apparatus to pause and appreciate there is a new sheriff in town and the rules of the game are changing,” said Mr. Van Saun, who took over at Citizens, a regional banking chain based in Rhode Island, after more than two decades on Wall Street.

What is more, Mr. Van Saun added, “the commitment to the positive elements of the platform — lower taxes, less regulation and pro-energy policies — continues to be there.”