Wall Street likes that presidential vibe.
Investors pushed the Dow Jones Industrial Average up above 21,000 for the first time Wednesday, heartily welcoming the much more traditionally presidential tone Donald Trump struck during his first address to a joint session of Congress Tuesday night.
This story first appeared in the March 2, 2017 issue of WWD. Subscribe Today.
But even as the market ticked off another milestone — the Dow closed up 303.31 points, or 1.5 percent, to 21,115.55 — the shift from Trump was much more about style than substance.
And it’s the substance of Trump’s policies and the kind of change they bring to the country that will ultimately help drive retail stocks, which largely missed out on the Wall Street rally. Many of the nation’s biggest retailers saw stock declines for the day, including American Eagle Outfitters, down 9.5 percent to $14.34 on a weak forecast; Nordstrom Inc., 2.3 percent to $45.60; Gap Inc., 2 percent to $24.33; Target Corp., 1.6 percent to $57.83; Macy’s Inc., 0.8 percent to $32.95, and Wal-Mart Stores Inc., 0.7 percent to $70.45.
“The whole thing comes down to mood,” said Bud Konheim, chief executive officer of Nicole Miller. “It really comes down to a psychological thing that goes on in the country. If last night’s speech was taken more positively, you’ll see a natural uptick in shopping; it’ll happen. If the stock market is a sign, and I’m not sure it is, things are getting better.”
Trump sounded notes of political unity and condemned “hate and evil in all of its very ugly forms” following threats against Jewish community centers, but he largely stood by his “America first” agenda, although he did not repeat the controversial term, a cornerstone of his inaugural address.
The Trump presidency got off to a rocky start, from arguments over the inaugural turnout and a remarkable spat with Nordstrom over his daughter Ivanka’s fashion brand, to whiplash-inducing shifts in international relations and a controversial and blocked effort to ban immigrants from some Muslim countries.
“I think he came on strong and I think he realized that that’s not the way you need to be, you don’t flip a switch and everything happens,” said Allen Schwartz, creative director and ceo of ABS by Allen Schwartz. “I think it was a reality check…for him. One rain does not make a spring, so to speak. I think his people told him, ‘Look, you can’t continue like this.’”
Trump argued to Congress that his presidency has sparked a “renewal of the American spirit” and vowed not to “allow the mistakes of recent decades past to define the course of our future.
“For too long, we’ve watched our middle class shrink as we’ve exported our jobs and wealth to foreign countries,” said Trump, claiming some reversals already on this front, pointing to moves by Wal-Mart and others to invest in the U.S. “The stock market has gained almost $3 trillion in value since the election on November 8th, a record.”
The Dow is up 15.2 percent since Election Day, but retail stocks, as read in the SPDR S&P Retail ETF, are ahead just 5.8 percent. Much of that has to do with a very tough holiday season, tepid forecasts for 2017 and systemic shifts tied to e-commerce and Millennial shopping patterns. But retail is also bogged down in the uncertainty surrounding Trump’s agenda.
The President has pushed for “fair” trade and vowed to lower corporate taxes, but the devil’s in the details of tax law, as always.
Experts were watching Trump’s address closely to see if he would come out for or against the border adjustability tax (BAT) in a House of Representatives blueprint that lowers the overall tax rate companies pay, but apply that lower rate to the cost of goods made overseas — a potentially large overall tax hike for many companies.
Trump made clear he was for a “big, big cut” to corporate taxes, but did not delve into such specifics.
Ceo’s from Gap Inc., J.C. Penney Co. Inc., Target Corp. and other retailers met with Trump two weeks ago to address their concerns, including the BAT.
Brian Dodge, senior executive president, public affairs, at the Retail Industry Leaders Association, said retailers at the meeting felt they were heard on the issue, but that there have been no specifics back from the president.
Dodge described the president’s address to Congress as “well developed and substantial.
“Right now, there is a degree to which Washington is in need of leadership,” he said. “The president, regardless of who it is, carries a really big stick and can wield it to advance policy proposals though the legislative process and last night his speech suggested that he was prepared to do just that on some major issues and that was well received by those who share his view on those issues.”
Rick Helfenbein, president and ceo of the American Apparel & Footwear Association, also applauded the President’s “positive tone” and his “proactive approach to solving some of our nation’s thorniest problems,” but is still keeping an ear out for word on the White House’s tax and trade proposals.
“We support comprehensive tax reform that enables economic and job growth, but it is imperative that the end result does not target or penalize any one industry,” Helfenbein said.