Today, the Dow Jones Index (DJI) continued its longest consecutive winning streak during the last 30 years. For the 12th straight consecutive day the DJI closed at a record high partly based upon Trump’s claim that he would spend “big” on infrastructure. The U.S. dollar rose as well on increased chances that there could be an interest rate increase next month. The implied odds now are at 50 percent up from just 34 percent only five days ago.
Trump is expected to set out his plans for tax and health-care reform as well as for infrastructure spending tomorrow February 28. It appears that the market has already factored in what they expect to be good news. The DJI rose 16.43 points to 20,839.19. It fell only three days in February so far. The S&P 500 rose also to 2,369.73 just 0.1 percent. Nasdaq rose 16.59 points as well. The Stoxx Europe 600 lost 0.1 percent continuing a decline at its close on Friday. The S&P/TSX in Toronto rose marginally 6.30 points after a decline of over 250 points on Friday.
The market rally may be in part due to Trump’s outline of his budget. This includes a $54 billion hike in defense spending that will no doubt please defense contractors and other members of the military-industrial complex. He will cut foreign aid, environmental programs and domestic agencies by an equal amount according to the White House. However, a group of more than 120 retired U.S. generals and admirals condemned the move at the expense of diplomacy and development. Although defense expenditures have been declining recently the U.S. still spends far more than any other country in the world, $596 billion and more than twice its nearest rival China. As mentioned, even many retired military officers regard the increased funds as better spent elsewhere. A letter from the group said:“Elevating and strengthening diplomacy and development alongside defense are critical to keeping America safe.We know from our service in uniform that many of the crises our nation faces do not have military solutions alone.” Nevertheless, Trump said: “This budget will be a public safety and national security budget. It will include an historic increase in defence spending to rebuild the depleted military of the United States of America at a time we most need it. We are going to do more with less and make the government lean and accountable to the people,” he said. “We can do so much more with the money we spend.”
Trump said that the increased spending would be financed by cuts in the Department of State, and in the Environmental Protection Agency (EPA) among other non-defense programs.
One official said the State Department Budget could be cut by up to 30 percent and would need to restructure and eliminate some programs. At present the U.S. spends about $50 billion a year on the state department and foreign assistance. The Trump increase matches closely the $640 billion in expenditure sought by Senator John McCain chair of the Senate armed services committee.
Chuck Schumer, the Senate minority leader said: “It is clear from this budget blueprint that President Trump fully intends to break his promises to working families by taking a meat ax to programs that benefit the middle-class. A cut this steep almost certainly means cuts to agencies that protect consumers from Wall Street excess and protect clean air and water. Most Americans didn’t vote to ease up on polluters, or to give Wall Street the green light to rip them off. They certainly didn’t vote to make all these cuts so that President Trump can hand out a tax break to the wealthiest Americans. This budget proposal is a reflection of exactly who this president is and what today’s Republican party believes in: helping the wealthy and special interests while putting further burdens on the middle class and those struggling to get there.”
Judging by the behavior of the stock market so far, Wall Street and many investors agree that Trump policies on balance are good for them.
