Market Call: Animal Spirits Are Back & Boosting the Roaring 2020s! Fueling A Meltup Too?

Just after Donald Trump won the presidential race on November 8, 2016, we observed that the economy and stock market were charged up with "animal spirits," a term coined by John Maynard Keynes meaning spontaneous optimism. Animal spirits are back now that Trump won a second term on November 5 and in a clean sweep if the Republicans win the House, which seems likely.

The stock market jumped for joy that the election results were definitive, thus averting a contested election. Stock investors are also thrilled by the regime change to a more pro-business administration promoting tax cuts and deregulation. Concerns about tariffs and bigger federal deficits haven't weighed on the stock market so far, though they seem to be weighing on the bond market. The S&P 500 rose 4.5% from Election Day through Friday last week, exceeding a similar comparison in 2016 (chart).