Why has the stock market boomed since Trump's election?

On the day of the American election in early November this year, stock prices, treasury bond yields, and the mighty US dollar all nose-dived, a normal knee-jerk reaction in the face of dire uncertainty. Since then, however, all have recovered, and many are currently teetering on the brink of all-time record values. On the other hand, the price of gold, the tried-and-tested alternative to the uncertainty of stock markets, initially spiked, and since then has steadily tumbled.

My question is, then, why? Trump's protectionist and anti-globalization outlook remains unchanged, and there appears to be little likelihood of him toning down many of his more extreme views, or his idiosyncratic management style. So, surely, the initial confusion and uncertainty of election day remains. And yet the American (and worldwide) business world seems to have very quickly come to terms with Donald J. Trump, and his vision of a rampant business-friendly USA.

The Dow Jones Industrial Average is currently hovering just under an unprecedented 20,000, the S&P 500 Index of the 500 largest companies is at 2,260, and the Nasdaq Composite Index is at 5,450. All are on a continuing upward trajectory after the short-lived jitters of November 9th. So, what gives?

The whole stock market system is notoriously unreliable, unpredictable and all but inexplicable, but the reasons usually given for this post-election rally are business expectations of a more lenient regulatory environment (particularly for the fossil fuels, pharmaceuticals and financial industries), lower corporate taxes, and the promise of a huge infrastructure construction plan under Trump and the Republicans. Whether these expectations are in fact justified remains to be seen - Trump is quite capable of just changing his mind on his policies, at the drop of a hat. But the bottom line is that, generally speaking, many big companies see the tantalizing prospect of substantially increased profits, regardless of the damage wreaked on the environment, health and social structure of the country and the world (these matters are considered to be outside the purview of business, basically lumped together under "externalities" and ignored). And if increased profits are in prospect, then stock exchanges will boom, and all will be perceived as well in the garden of the business world.

It is worth noting that most of the big gains that are driving this stock exchange rally have occurred, unsurprisingly, in the Big Oil, Big Bank and Big Pharma industries. For example, the stocks of Goldman Sachs, a particular favourite of Mr. Trump, have shot up over 30% since the election just over a month ago. Other sector that are expecting specific boosts from Trump's policies (e.g. for-profit higher education companies, private prison corporations, etc) have also done well. On the other hand, sectors that can expect a hard time under Trumpism (like healthcare and green-tech, for example) have suffered.

If, like me, you are inherently suspicious of the stock exchange system and its motives, then none of this will come as too much of a surprise. But it is nevertheless a little shocking, not to say galling, that such a financial killing is being made on the back of what must rank as one of the worst election results ever.