More and more business leaders and strategists on Wall Street are expressing concern about what President Donald Trump’s protectionist policies and unpredictable nature can do to markets and the economy.
But we all know that action speaks louder than words. What investors are actually doing is at odds with what people are saying. The Dow, S&P 500 and Nasdaq reached top results again on Friday.
And Russell 2000, the stock index of small companies that mostly do most of their business in the U.S., is now just a few points away from the cosmic peak that hit last December amid the euphoria of the Trump market.
What’s more, the VIX (, a measure of instability known as the measure of fear on Wall Street, has also been reduced by almost 25% this year as well. If investors were really afraid of Trump, the VIX would have to be a lot bigger. )
I CNNMoney’s own index of fear and greed, which looks at VIX and six other measures of investor sentiment, shows signs of greed and is not far from the level of Extreme Greed.
Of course, it seems Trump still can’t help tweeting things that, let’s be honest, won’t do anything to help the economy – even though Nordstrom investors are richer despite Trump attacking them for throwing his daughter Ivanka’s brand.
But giving loans where they should be seems to be the main reason stocks have taken it off again lately because Trump has promised to announce a “phenomenal” tax plan soon.
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Trump also re-advocated for more infrastructure investment when he met with airline executives on Thursday.
That market wants to hear.
“We still expect fiscal stimulus, lower taxes and less regulation,” said Matt Lockridge, manager of Westwood Small Fund Value. “Time is a big issue, but it’s coming.”
Lockridge believes many of the companies that generate most of their revenue from America should benefit if Trump’s stimulus shifts the economy to a higher gear.
He loves stocks in a variety of industries, such as cinema owners Mask (, a snack food company )J & J ( and an aerospace equipment company )Kaman (. )
Another money manager said he was still surrounded by small U.S. stocks that could get a withdrawal from Trump’s policies.
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Barry James, president and CEO of James Investment Research, said he bought it iShares Russell 2000 ETF ( the day after the election because he is confident that Trump’s stimulus plan will spur growth for small businesses in the United States. )
“When Trump first said America, I really think it means,” James said, adding that he meant Internet phone services Vonage (, renting to your own retail )Aaron’s ( and discount chain )Big lots ( it could all progress if Trump’s proposals pass. )
But there is another reason why U.S. markets are almost always high. Despite all the uncertainties in Washington, the U.S. is still seen as a paragon of relative stability compared to other parts of the world.
The European economy remains a big card thanks to Brexit, the rise of populism in France, leading to concerns about the so-called Frexit and more concern about a problem that would never go away – Greece’s debt is huge.
And the Japanese economy remains stagnant. Now we are talking about more than just a lost decade. It is plural. And the Chinese economy is slowing.
Bond fund director Bill Gross often joked that America was like what Johnny Cash and Kris Kristofferson sang about in “Sunday Morning Coming Down” – “the cleanest dirty shirt.”
To that end, analysts at bond rating firm Fitch wrote in a report on Friday that “elements of President Trump’s economic program would be positive for growth,” but added that “the current risk balance points to a less benign global outcome.”
There are two sides to that coin. Trump’s explosives could be pursued again.
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His continued fondness for rooting companies he disagrees with on Twitter could undermine investor confidence.
And while his proposed travel ban on immigrants from seven Muslim-majority countries has so far lifted the U.S. judicial system, the president has vowed to fight for its re-establishment.
Even if he loses that battle, it is still clear that Trump is seriously turning to a greater extent, with tariff plans and tax-adjusted borders that could ignite trade wars with Mexico, China and Japan. This could harm large U.S. multinational firms and lead to job cuts.
But investors still seem to believe / hope that the benefits of Trump’s plans to stimulate growth and reduce taxes will outweigh the impact of isolationism. Let’s hope they’re right.
Investors may hold their noses, close their eyes and put cotton in their ears to stifle the president. But they are still buying stock.
CNNMoney (New York) First published February 10, 2017 at 11:55 AM ET