by the Editor’s Team with Gianluca Errico NEW YORK CITY. When sentiment changes in the stock market, it is a thing to behold. If you go back to important bear market bottoms, you can easily see the speed with which investors discard their old ideas that stocks are dangerous and embrace the notion that stocks have suddenly become the place to be.On Friday, March 6, 2009, stocks were still hated, especially banks. The S&P 500 opened higher that day but quickly succumbed to the rampant selling that had driven the index down 22% in just the previous month. But then on Monday, March 9, everything changed. Banks rolled higher that day, putting in 15–20% gains. The S&P 500 finished up 6%. Sentiment had reversed over the weekend. And when you see sentiment change like that, you’d better get on for the ride or stay out of the way. A similar thing happened after the surprise election of Donald Trump. Sentiment for stocks reversed, and it’s been off to the races. It’s a little unusual to see such a powerful move come when stocks have been trading pretty well. But when we look back to how individual investors felt about stocks a month ago, the change is palpable. The shift in sentiment that occurred in the wee hours of Wednesday morning on November 10 produced an amazing rally. Bank stocks are the perfect example. They were vilified under Obama, and Trump says he wants to make things easier on them by reversing some or all of the Dodd-Frank banking regulations. That right there (along with an imminent interest rate hike) has pushed Bank of America up around 30%. It’s not that people hated stocks like they did in March 2009. But there wasn’t any enthusiasm, that’s for sure. Economic growth remained weak, companies weren’t investing in their business, earnings growth was stagnant, valuations were on the high side, and the Fed was the most important sentiment indicator. But there was more to it than that. The Obama administration had set a somewhat adversarial relationship with Corporate America. Banks were targeted, and there was discussion of breaking them up. Corporate tax rates were left at their ridiculously high rate. If you consider the success of U.S. businesses to be part of our national interest, well, there wasn’t a whole lot happening to help them be successful. I can’t tell you that our next president will actually be more business friendly. But the 180-degree shift in sentiment says investors believe he will be.
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