Trump gets "B" or "B-minus" from Wall Street pros

Using the market as a measure of success, President Trump has something to boast about: The 5.5% gain for stocks during his first 100 days in office is third-best of any president since World War II.

Saturday marks Trump's 100th day in the White House. The return of the Standard & Poor’s 500 stock index under Trump since Inauguration Day is better than the past three U.S. presidents, better than Barack Obama in 2009, George W. Bush in 2001 and Bill Clinton in 1993, according to data compiled by financial research firm CFRA. The 9% jump in the early days of John F. Kennedy’s presidency in 1961 ranks No. 1.

Despite the good reception in markets, Wall Street pros have been frustrated with Trump’s inability to follow through as quickly as promised on getting laws passed that are perceived as good for the U.S. economy. Trump’s failure in late March to repeal and replace Obamacare, for example, raised questions about his ability to work with Congress and get legislation enacted. The gridlock in Washington also pushed back the timetable on other parts of his agenda more focused on boosting growth, such as tax reform and spending on infrastructure, which investors hoped would be at the top of Trump’s to-do-list.

Those concerns are a big reason why the “Trump Rally” has lost some of its momentum, and why Wall Street pros interviewed by USA TODAY mostly gave the president grades of “B” or “B-" for the job he’s done so far.

Stock market gains were very strong after Election Day when investor enthusiasm over Trump’s growth-friendly policies was highest. But returns slowed after he took office, especially for stocks in sectors of the economy that were seen as benefiting most from the president's call to slash taxes, roll back regulations and spend $1 trillion to upgrade the nation’s roads and bridges over a decade. The S&P 500’s financial sector, for example is up nearly 19% since Election Day, but less than 3% since Trump took office, according to S&P Dow Jones Indices. Similarly, stocks in the industrial sector, which include makers of heavy machinery, have also seen their gains shrink.

Wall Street lauds Trump for reaching out to business leaders. The president has worked to enhance his pro-business image, meeting regularly with many of the nation's top CEOs from leading industries, such as tech, autos and steel.

Much of the stock market’s success under Trump, however, has been built largely on hopes of him succeeding in getting at least some of his growth-friendly promises passed, market pros say.

While the hope remains, doubts are creeping in.

“What can he actually get done? How many of his promises can he turn into policy?” asks Matthew Bartolini, head of research at State Street Global Advisors.

Bartolini says those types of questions, which first started in early March when the Republican-led Congress unveiled its plan to replace Obamacare to mixed reviews, resurfaced Wednesday when Treasury Secretary Steven Mnuchin and Trump's chief economic advisor Gary Cohn outlined broad details of Trump’s tax reform plan on Day 97 of his presidency.

What Wall Street covets most in of all Trump’s promises is lower taxes for U.S. corporations, as keeping more of the money they make will boost profitability and spur growth, they argue. The president’s plan calls for a drastic cut — from 35% to 15% — in the amount of taxes U.S. companies would pay. It also lowers individual rates and reduces the number of tax brackets from seven to three. Trump’s team, which earlier had been shooting to get a tax bill in front of Congress by August, now says later in 2017 is more realistic.

Wall Street sees roadblocks ahead for Trump's current tax plan and says the odds of getting it passed are low, mainly because it would reduce government revenue and increase the nation's deficit and debt even more. Ultimately, investors expect more modest tax cuts to get passed.

So just like in his first 100 days in office, Trump will again be confronted with questions of whether he can deliver.

“There is still a lot of hype built into the market in anticipation of Trump's policies,” says David Schiegoleit, managing director of investments for U.S. Bank’s Private Client Reserve, adding that the stock market, which is expensive relative to earnings, is vulnerable to disappointment.

KC Mathews, chief investment officer at UMB Bank, says there is a risk that the market could stumble if investors “lose patience.”

And while Trump has been busy signing executive orders, including ones aimed at doing away with parts of the Dodd-Frank financial reform act, abolishing business regulations, restarting oil projects like the Keystone XL pipeline and withdrawing from trade deals like the Trans-Pacific Partnership, Matthews says the real question is: "Has he been effective?"

Matthews' answer: "From a market perspective, I believe the jury is still out."

Still, there is broad agreement that if Trump is successful in lowering the corporate tax rate, even if it is a smaller cut than what he has proposed, it will be positive.

“The market is starting to salivate over the prospects of tax cuts,” says U.S. Bank’s David Schiegoleit. “What’s holding the market back is it is still just rhetoric.”

Some Wall Street pros say Trump should not get all the credit for stocks’ robust gains. Many factors now driving prices higher, such as stronger profit growth at U.S. companies and an improving economy, were underway before the president was elected.

“All the gains should not be attributed to him,” says Zachary Karabell, head of global strategies at Envestnet.

The nation’s good business environment, in a way, has allowed investors to be more patient with the slow-moving Trump agenda.

“The economy being strong is a nice buffer for Trump,” says Ryan Detrick, senior market strategist at LPL Financial. “Double-digit earnings growth can make up for a lot of sins. But you can’t just make promises. You have to deliver.”