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In the week ahead, look beyond presidential bragging rights about the stock rally

The Wall Street entrance to the New York Stock Exchange. There is no question the state of the stock market is strong. It has rallied more than 35 percent since Election Day 2016.
The Wall Street entrance to the New York Stock Exchange. There is no question the state of the stock market is strong. It has rallied more than 35 percent since Election Day 2016. AP file/Nov. 13, 2015

There is no question the state of the stock market is strong. It has rallied more than 35 percent since Election Day 2016. The first year of the Trump administration was the second best first year presidential performance for the Dow Jones Industrial Average. Only Franklin Delano Roosevelt’s first year was better.

Understandably, President Donald Trump may boast about the stock rally when he delivers his first State of the Union address on Tuesday night. He also wouldn’t be exaggerating if he lays claim to presiding of the strongest economic growth in a few years. The U.S. economy has had its two strongest consecutive quarters of growth in three years since Trump’s inauguration.

But instead of gloating about the statistics, the president needs to offer guidance about he will guard against political dysfunction evolving into financial risk. Don’t expect it, though.

The government flirted with this last week when it shutdown for three days. But more than government shutdowns, the inability to effectively manage the country’s finances threatens long-term investor confidence. Next month, it’s another budget deadline. The month after that will bring a showdown over the debt ceiling.

Some corners of the market may have already begun pricing in these risks. Ten-year treasury yields are up to 3 1/2-year highs. The U.S. dollar has sunk to a three-year low.

The states of the stock market and the economy are strong. But bragging rights aren’t guaranteed to last.

Tom Hudson hosts ‘The Sunshine Economy’ on WLRN-FM; @HudsonsView.

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