A year into the Trump presidency 401(k) balances are looking good

Adam Shell | USA TODAY

Show Caption Hide Caption Trump may have helped stocks, but other presidents have done more The S&P 500 is up 21% since Election Day.

Wall Street measures success in portfolio profits, and by that quantitative measure President Trump gets high marks from investors for his first year in office.

The numbers tell a positive story.

Stocks have risen sharply since Trump took office on Jan. 20, 2017. The U.S. stock market, according to Wilshire, has posted a paper gain of $5.9 trillion. The Dow Jones industrial average has rallied 31.5%, the third-best gain in a president’s first year in office and well above the 12.5% average since 1900, Bespoke Investment Group says. And 401(k) investors have seen a $10,000 investment in the Dow grow to roughly $13,150.

“Regardless of anyone’s political opinion of Trump, you can’t argue with results,” says Tom Essaye, a trader and founder of The Sevens Report, a Palm Beach Gardens, Fla., newsletter that delivers key market intelligence at 7 a.m. before trading begins.

Trump’s style may turn off some, but his pro-business policies have boosted his following on Wall Street.

“When I look at my 401(k) how can I not give Trump an A+ grade,” says Bruce Bittles, chief investment strategist at Baird. “Forget personalities, look at the results.”

More: Dow jumps 323 points, closes above 26,000 for first time in its 121-year history

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The presidents with better gains than Trump in their first year in office were Franklin D. Roosevelt, who was in charge when the Dow rallied 96.1% in the one-year period beginning on March 4, 1933, when the market was rebounding from the Great Depression; and Barack Obama, who saw the Dow rally 33.4% in the year after he took office on Jan. 20, 2009, when stocks first began to recover from the meltdown caused by the 2008 financial crisis, Bespoke data show.

Trump, of course, can’t take all the credit for the stock market’s good fortune. He entered office with equities already eight years into the second-longest bull market in history. His move into the Oval Office also came at a time when economies in most of the world were growing at the same time for the first time in a decade, a phenomenon referred to as synchronized global growth, says Bill Hornbarger, chief investment officer at Moneta Group, a money management firm in Clayton, Missouri.

Still, Hornbarger and other Wall Street pros say the so-called “Trump Effect” on markets has been real, and that the president deserves recognition for unleashing so-called “animal spirits,” a term used to describe investors and CEOs willingness to take risks and make moves to grow their wealth and businesses.

Trump's biggest market-moving move so far has been a major overhaul of the nation's tax code. "The tax cut has kicked the market into a higher gear," says Paul Hickey, a co-founder at Bespoke Investment Group. In December he signed off on a major corporate tax cut that investors say was long needed to boost the competitiveness and profitability of U.S. companies and speed up the pace of economic growth. The president has also cut back on regulations and so-called red tape, which he says were hampering businesses.

So what exactly is the Trump Effect and what makes the nation’s 45th president so friendly to markets?

BUSINESS 'CHEERLEADER IN CHIEF'

Business has found a friend in Trump, someone willing to reduce many of the obstacles that held back their growth.

"Trump helped inject confidence into the business community," Essaye says. "He has taken on the role of business cheerleader-in-chief."

CEO confidence in business conditions in the next six months is at a six-year high, according to a quarterly outlook released in December by The Business Roundtable.

PRO-BUSINESS APPROACH

The adversarial relationship between Washington and business that developed after the financial crisis has given way to a pro-business approach, says Greg Valliere, chief global strategist at Horizon Investments and a veteran Wall Street policy analyst.

The president has switched the dial on Capitol Hill from an anti-business attitude to a business-friendly one. "Trump has ushered in a new climate," says Valliere, who dubs the new Trump mantra: "Anti-regulation. Pro-stimulus."

MARKET MOOD SHIFTER

Trump has brightened the mood of investors, consumers and business leaders with his continual emphasis on getting the economy moving again and helping American workers get ahead, says Bittles.

"His largest influence," says Bittles, "has been psychological."

Trump has brought back confidence, Bittles adds, and that is what is needed for businesses to invest and consumers to spend. "American companies are on the move and becoming very aggressive," he says, "because the economy has finally moved out of first gear" under Trump.

Apple, he points out, just announced "giant expansion plans," and Walmart, the nation's biggest employer, is giving its workers raises and bonuses.

Consumer confidence is at its highest level in 17 years. CEOs are optimistic about the future. And workers are benefiting from the corporate tax windfall as a growing number of employers pay out one-time bonuses, boost wages and expand their businesses in the U.S.

"There has been an atmospheric change," says Tom Block, a Washington policy analyst at New York-based investment research firm FundStrat Global Advisors.

So can Trump's positive impact on markets continue?

One risk is if Democrats gain control of either the House of Representatives or the Senate in the mid-term elections later this year, ending Republicans' stranglehold on power in Congress, says Fundstrat's Block.

Another potential negative for investors, says Valliere, is "Trump's protectionist trade views," which has generated concerns "about a potential trade war with China" and a potential U.S. withdrawal from NAFTA, the nation's current trade agreement with Mexico and Canada.

Right now, though — for the market — the policy positives outweigh any negatives.

If Trump's policies help boost GDP growth, corporate earnings and the lives of workers as predicted, then yes markets can continue to thrive, says Charles Gabriel, president of Capital Alpha Partners, a Washington, D.C. firm that specializes in the investment implications of government actions.

"Is the rally sustainable? We'd say yes," Gabriel says.