Over the last two quarters the S&P 500 has grown by 8.23%. Call it what you will, the Trump Bump, or the reflation trade… I ‘m going to call it the hope trade.

Earnings had gone through a year and a half long drought leading into the third quarter earnings season. With oil price gains, we began to see broad corporate earning’s revival. While corporate earnings have supported increased valuations, it does not tell the whole story of price growth over that period.

After the US election, investors have pushed valuation up on assets that play into the following themes: the hope for reform of the ACA, the hope for tax reform, the hope for infrastructure spending, and the hope for a more aggressive stance on the trade front.

The recent trend of the hope trade leads me to be weary as actual action is necessary in order to have the trades of the last six months remain viable.

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