Ever since Donald Trump was inaugurated as the 47th President of the United States, the stock market has been soaring higher, for one simple reason. He has yet to enact any new tariffs.
We think that will continue – and that the rally on Wall Street will keep roaring.
Why? Well, investors like a lot of things about Trump’s economic agenda. They like the deregulation and the tax cuts. They like the pro-growth initiatives such as the newly announced Stargate project – a $500 billion investment into building advanced AI infrastructure in the U.S.
Wall Street likes all those things. But it does not like tariffs.
That’s the one part of Trump’s economic agenda that worries investors. They don’t want tariffs because they could lead to higher inflation, higher interest rates… and lower stock prices.
Higher inflation may mean no more rate cuts (or, even worse, more hikes) at a time when interest rates are already sky-high and consumers are heavily burdened by them.
As such, stocks stumbled in November and December any time that Trump pounded the table on tariffs.
But Trump has been back in the White House for several days now. And despite acting on a lot of his other key political initiatives like energy deregulation, immigration reform, and federal spending, he has yet to take any action on tariffs.
Tariffs So Far: All Talk, No Walk
Sure, President Trump has talked about them. On Inauguration Day, he said that he may consider imposing tariffs on Canada and Mexico in February. He followed that up on Tuesday with similar threats against the EU and China as well.
But so far, the tariff talk has been just that – talk.
And that’s comforting Wall Street because that talk was supposed to turn into walk by now.
Trump had said that he planned to introduce tariffs on Day One… not February.
Wall Street is interpreting the lack of action as a sign that maybe Trump will go ‘light’ with tariffs in his second term.
We think that’s the correct interpretation. And if so, it means stocks should keep rocketing higher.
Two plain truths are that: 1) Trump loves the stock market, and 2) The stock market doesn’t love tariffs.
Given those realities, we think Trump is purposely delaying action here to see if he can use the threat of tariffs to accomplish his goals – tighter border security, better trade deals, etc. – without actually enforcing them. If successful, he would achieve a win-win situation: delivering on campaign promises and sending stocks higher.
We think that’s what Trump wants to do. Therefore, we expect the ‘tariff talk’ will remain just that for the foreseeable future. And stocks should push higher on pro-growth optimism.
The Final Word
Indeed, the market’s fundamental and technical setups are very bullish right now.
After last week’s soft inflation reports – and oil prices retreating significantly over the past few days – real-time inflation pressures appear to be easing. We’ve also entered the fourth-quarter earnings season. And thus far, the results have been stellar, headlined by robust results from Netflix (NFLX), Seagate Technologies (STX), Bank of America (BAC), and more. Plus, there’s now even more optimism surrounding the AI Boom following the newly announced $500 billion Stargate initiative.
Technically speaking, things look just as good. The S&P 500 just bounced off major support levels at its 100-day moving average and the bottom side of its 2024 uptrend trading channel. The bounce has been strong enough to trigger a bullish crossover on the moving average convergence/divergence (MACD) line. Meanwhile, the relative strength index (RSI) is shooting up toward 70.
The fundamentals and technicals underpinning the stock market right now are incredibly bullish. As such, so long as tariff talk remains talk, stocks should continue to rise over the coming weeks.
And to help us find some of the best stocks to buy for this ongoing rally and beyond, we’re looking to Elon Musk – the world’s richest man – and his big AI venture, xAI.
We’re confident that firm has the opportunity to become a major winner in this next phase of the AI Boom.
And while it’s not yet publicly traded, we’ve found a promising ‘backdoor’ way to invest in the company.
Learn more about xAI and its portfolio-boosting potential now.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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