US stock market set to break record for bull market despite Trump's day of disasters

They called it the Trump bump.

After the Orange man won the race for the White House, with his promises of fat corporate tax cuts, Wall Street took off.

Doubts? Don’t worry about doubts. This is our guy! A capitalist! Let’s send those stock markets to the moon.

They duly responded. But the markets’ long bull run actually long predates the Donald’s hostile takeover of the Republican Party and the subsequent bump.

British broker Hargreaves Lansdown makes the point that, in the absence of a really heavy fall today, it will have become the longest in history by the time of the close, having got going way back in March 2009.

Despite a dramatic day in Washington, the US market opened flat. The record books look set to be updated.

For how long can it continue? Who knows. Predicting markets is mostly a game for mug punters. Even the sharpest minds on the street of dreams get it wrong, although when they get it right, read when they get lucky, it sure pays handsomely.

There have been only a couple of shudders along the way. But Hargreaves’ senior analyst Laith Khalaf has some facts that might make the small investor shake a bit.

He notes that the widely used Shiller Price Earnings Ratio shows the valuation of the broad based S&P 500 (a far more reliable yardstick than the more commonly quoted Dow) has only been at its current level twice before, in 1929 and in the late 1990s.

The former was just before the Wall Street Crash. The latter predated the tech bust, the impact of which was painful, but less shattering.

There are certainly good reasons for fearing that the Trump bump could ultimately translate into a Trump slump before too long. Central banks are tightening policy, and while Mr Trump might be a capitalist, he’s no lover of free trade. His policies are causing some investors to fasten their seat belts.

It is true that an early exit from the White House is now looking more possible in the wake of a disastrous day that has seen former lawyer Michael Cohen admitting to violating political campaign laws at the direction of ‘the candidate’ mere minutes after the jury in the trial of Paul Manafort, Trump’s former campaign manager, returned a guilty verdict on eight counts of bank and tax fraud.

But would a President Mike Pence prove any better for world trade? There are some who fear the current vice president could be worse.

Closer to home, in a nation dogged by Brexit related uncertainty, and governed with arguably less skill than even the current US President has shown to date, share prices are a little less frothy despite the boost they have received from the weak pound (which boosts the value of the FTSE 100’s overseas earnings).

Here the market’s Price Earnings Ratio is pretty close to its long run average, standing at 15.8 compared to 14.3. At the height of the 1990s tech boom it hit 26.7.

If there is to be a correction, the FTSE’s landing may be a softer one.

That won’t be much consolation to those with money at risk. Trying to call the downturn might put them on a hiding to nothing, but the benefits of diversification have seldom been clearer.