OAKLAND, Calif. (Tom Vacar/KTVU) - As the stock market rolled on to its fifth 1,000-point gain milestone, we thought we should do a reality check. For now, it's clear economic sailing, but beware of financial riffs.
The President's political promises that there will be an extremely business friendly tax reform bill has turned into an expectation since his election. That's the word on Wall Street and Main Street. We begin at an Alameda post office where we spoke with customers. "I believe it’s because Donald Trump is in office. Wall Street seems to like Donald Trump," said Abdul Cooper.
As Doug White puts it, he believes corporations are anticipating a tax break. And rather than potentially giving it to workers, they’d rather it goes to shareholders. Or Pamela Barrett, who believes the U.S. is “gonna survive” and it’s one hundred percent attributable to President Trump.
Since New Year's Day, the Market has hit five one thousand point milestones, going from about 20 thousand to well over 24 thousand on the last day of November with enough trading days left to hit yet another.
Jim Wilcox, Professor of Economics at UC Berkeley's Haas School of Business, says our low unemployment economy is strong, stable, broadly based and showing no signs of a bubble.
"I think almost everybody has been surprised by the enormous increase in equity values this year. But stock markets are historically very volatile. So it is not unusual to see a 20% move in a stock market either up or down over the course of a year," said Wilcox.
So now, Congress had better deliver. "If, in fact, all of a sudden that reform effort was to flounder on the rocks, I think you would have to imagine that these equity markets would give back a lot of what they've recently risen for," said Wilcox.
“And, even if tax reform comes, continued success is not guaranteed. There's always the possibility of some very large, unfortunate event involving international relations of some sort that could really hurt the economy and hurt us in all kinds of non-economic ways as well.”
For now, those with 401(k)s and other retirement plans are being amply rewarded. Whether that is sustainable remains an open question.