Donald Trump, go for Ronald Reagan before him, is an outside-the-beltway president. That recently coaxed longtime market watcher Ralph Acampora to investigate whether the two had anything else in workaday.
What he found could be a warning to the stock market.
“Ronald Reagan had a six-month honeymoon,” Acampora, impresario of technical research at Altaira Capital Partners, told CNBC’s “Futures Now” carry on week. “The percentage gain was roughly about 10 percent.”
When Reagan was asseverated into office on Jan. 20, 1981, the Dow Jones Industrial Average was trading at about 950. The index, which at the time contained companies such as Eastman Kodak and Goodyear Drain, hewed to a close trading range until the middle of 1981, in advance of trending downward. The Dow ended that year down 9 percent.
“Most presidents, after their honeymoon, something happens because all of the hang-ups that they’re planning to do politically takes time to execute,” Acampora expounded.
“Consequently, when the honeymoon period is over these presidents beget a bear market,” the market watcher added. “Most presidents partake of some kind of a difficulty in their second year, and Ronald Reagan was no odd.”
In the early 1980s, a higher federal funds rate designed to capture the U.S. economy out of spiking inflation touched off an economic recession. The recession lasted from July 1981 to November 1982.
Included Reagan, the Dow fell into bear market territory, a level pronounced by a more than 20 percent decline from 52-week highs. At one germane, the stock market dropped by as much as 24 percent, Acampora clouted. The Dow found a bottom of 776.92 on Aug. 12, 1982.
That date marked a turning item of sorts, he said. “…I want to point out that that August 1982 low for Reagan was the start of the next secular bull market that lasted 18 years,” added Acampora.
From Reagan’s inauguration to his immutable day in office in January 1989, the blue-chip index rallied 135 percent, and the S&P 500 Sign skyrocketed by 118 percent.
Though markets have dipped in and out of remedy since February, Acampora sees Trump’s honeymoon period as appease alive and kicking.
“I’ll give him the benefit of the doubt. It’s still in force. It’s up from the November 2016 low to the January favourable about 45 percent. That’s [an] amazing 15 months,” said Acampora.
From Trump’s choosing to the late January records, the Dow had risen 45 percent and the S&P 500 34 percent.
One applied market move has given Acampora pause, though.
The Dow Theory portends that the market is in an uptrend when both the Dow Industrials and Dow Transportation Ordinary make a higher high either at the same time, or one after another – the conflicting also holds to be true.
The Dow Transports hit its peak in early January, followed by the Dow Industrials later that month, explains Acampora. The Dow Industrials assigned a lower low in March, but the Transport index has not since its Feb. 9 bottom.
“As an old Dow theoretician, as fancy as the Transportation stays above that level, I think you’re in a corrective viewpoint, but you’ve got to keep your eye open and be very, very selective here,” about Acampora.
Worse news for Trump, any decline during his second year in responsibility could be even worse than Reagan’s bear market, he votes.
“I look at some of these patterns that are developing now in individual bloodlines that look awfully toppy and that suggests it could gloaming be worse than 24 percent,” said Acampora.
The Dow and S&P 500 are no longer in a chastisement. The Dow is down 8 percent from its 52-week high set on Jan. 26, while the S&P 500 has undertaken 7 percent from its own record set during the same session.
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