Maria: Dow 24,000 and the Trump Boom

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The election night selloff turned out to be a huge buying opportunity. Companies had been sitting on cash—not investing or hiring. ObamaCare compliance was a nightmare for many business owners. It made them wonder what other big idea from Washington would haunt them in the future. Mrs. Clinton was likely to increase business costs further, while Mr. Trump had vowed to reduce them. Even in the middle of the election-night market panic, the implications for corporate revenue and earnings growth seemed obvious.

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The next morning, with the Trump victory confirmed, I told my colleague Martha MacCallum that I would be “buying the stock market with both hands.” Investors began doing the same. U.S. markets have added $6 trillion in value since the election, with investors around the world wanting in on America’s new growth story. The Federal Reserve Bank of Atlanta is now forecasting the third straight quarter of U.S. gross domestic product growth around 3%.

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It’s not just an American growth story. For the first time in a long time the world is experiencing synchronized growth, which is why Goldman Sachs and Barclays among others have recently predicted 4% global growth in 2018. The entire world benefits when its largest economy is healthy, and the vibrancy overseas is reinforcing the U.S. resurgence.

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Year One has been nothing short of excellent from an economic standpoint. Corporate earnings have risen and corporate behavior has changed, measured in greater capital investment. Businesspeople tell me that a new approach to regulation is a big factor. During President Obama’s final year in office the Federal Register, which contains new and proposed rules and regulations, ran to 95,894 pages, according to a Competitive Enterprise Institute report. This was the highest level in its history and 19% higher than the previous year’s 80,260 pages. The American Action Forum estimates the last administration burdened the economy with 549 million hours of compliance, averaging nearly five hours of paperwork for every full-time employee.

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The Federal Register page count is down 32% this year. Mr. Trump says red tape becomes “beautiful” when it is eliminated, and people who manage businesses certainly agree.

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The prospect of tax relief is also raising expectations for growth, as the U.S. prepares to reduce the industrialized world’s highest corporate income tax rate. As with regulation, U.S. businesses don’t need to have the lightest burden; they only need one that’s competitive with the rest of the world.

As Rep. Jeb Hensarling (R., Texas) told me recently, when Washington simply “stops the beatings,” growth happens on its own. For too many years, U.S. businesses have seen mergers and acquisitions—or moving corporate headquarters out of the country for more attractive tax havens—as almost the only path to success. When a firm can’t achieve growth organically, it must acquire it. And when it faces a combined federal, state and local income tax rate of nearly 40% in America, it will often merge with a competitor in Ireland. Moving a company’s headquarters to Dublin means paying only 12.5%.

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