Is Donald Trump boosting the economy? Goldman finds mixed signals – MarketWatch

Ever since President Donald Trump took office, the main question on the minds of investors has been, will the market optimism his election inspired prove justified by economic activity, or did the rally simply set stocks up for a bigger fall? According to a Goldman Sachs analysis of corporate commentary, its a little of both.

Management teams were mixed in their assessment of whether a much-discussed rekindling of animal spirits since the election has led to a tangible increase in demand, the investment bank wrote in its quarterly Beige Book, which examines the earnings transcripts of companies in the S&P 500 for trends.

Most management teams recognized an improvement in sentiment and growth expectations, but many said they have not yet seen evidence that improving sentiment is translating into increased business activity.

See also: Trumps animal spirits are ahead of reality, says 17-time winner of forecasting contest

While the Trump Era has been accompanied by some positive economic data, including a labor market that continues to hover near full employment, other indicators have suggested economic activity remains tepid. First-quarter GDP came in at its slowest pace in three years.

Goldmans report examined transcripts from several companies conference calls, including those from firms that havent seen notable improvement despite the uptick in sentiment. One of these was American Express Co. AXP, -0.55% which said that as we look at our results, its hard for us to see anything thats suggestive of a material uptick in consumer confidence or consumer or commercial spending.

Certainly, we are as hopeful as anyone that there, in fact, is stronger economic growth to come in the future. I just cant say I see any evidence of it right now in our results, said Jeffrey Campbell, the companys chief financial officer, in an April 19 conference call.

Trumps election sparked an extended rally in stocks that lifted the S&P 500 SPX, -0.15% nearly 12% and took major indexes to repeated records. Those gains primarily came as investors bet that the economic policies Trump was expected to advocate forand presumably pass, given the Republican Party also controlled majorities in the House and Senatewould accelerate economic growth and boost corporate profits.

Initiatives to roll back regulations were particularly desired, but according to Goldman, corporate management teams see little progress on this front, while remaining optimistic.

Managers hoped for widespread deregulation and improved regulatory clarity, but uncertainty remains high, the Goldman report said. A large number of transcripts referenced management enthusiasm about a potential easing of regulatory burdens. However, only a few firms pointed to examples where such a change in ideology or enforcement is already taking place.

In January, Trump signed an executive order requiring the elimination of two rules for every new regulation created. However, investors continue to await more concrete details on key issues like tax reform, which has been delayed multiple times, and health care. While a health care reform bill passed the Houseafter an earlier attempt failedits prospects in the Senate were less clear.

One of the firms that was optimistic on the regulatory front was AT&T Inc. T, +0.13% where Chief Executive Officer Randall Stephenson told analysts on an April 26 conference call that there was clearly a return to a lighter touch pro-growth regulatory philosophy. He added, We think this is incredibly positive for our country and that it could catalyze the economic growth all of us have been looking for.

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Is Donald Trump boosting the economy? Goldman finds mixed signals - MarketWatch