Market has priced in a perfect Trump

It's simply incredible how much hope the market has given to Trump now! Since his surprising win in the election, there is a widespread euphoria prevailing now that Trump's administration will boost the economy. I agree in principle that what Trump has promised to do will be very positive to the US economy. Here is what he has planned to do that will be beneficiary economically:

• Cut the corporate tax by half and bring back the huge amount of money many companies hold overseas
• Bring down the individual income tax
• Largely overhaul the complicated regulations
• Significantly increase investment in infrastructure  

These indeed all sound very good and exciting but the thing is none of them are an easy task for Trump. You see, Trump is probably the most hated president in the US, not only by Democrats but also many Republicans. Even though GOP is now controlling both House the Senate, which is a great plus for Trump, it will still not be an easy job for him to try to get what he wishes to have. There are simply too many people from both sides who want to see a failed Trump, period! The first fight will be coming immediately regarding the US debt ceiling, which will be surpassed late March. Republican as a whole is very sensitive to the government deficit and not in favor of raising the debt ceiling. Recall that Obama government has been forced to close twice I believe due to the debt ceiling issue. What Trump is planning to do will be great in the long run but in the near future will significantly increase the debt load. I’m sure Trump will get a raised debt ceiling but probably will have many compromises he has to make. Actually each of his proposed changes will have some strings attached and I can hardly believe Trump would just get exactly what he asks for. In other words, while the market likes what Trump is planning to do and seems to feel that it will be a smooth implementation moving forward, I think there will be a lot of surprises along the way that will make the market nervous. We may not need to wait long before seeing some sort of shock to the market. Expect to see high volatility in the weeks ahead!

Looks like I’m not alone along this line of thinking. Here is what MarketWatch reported a couple of days ago: Demand for one-month call options tied to the CBOE Volatility Index, a popular gauge of stock-market volatility, has spiked in the past week, a sign that some are bracing for a sharp downturn following the inauguration of President-elect Donald Trump. In that time, investors have purchased 250,000 VIX call options with a strike price at 21, and another 100,000 with the strike at 22, according to Brian Bier, head of sales and trading at Macro Risk Advisors, an options brokerage. This is a huge red flag as we are talking about millions of dollars that some traders are willing to bet for a sharp increase of VIX in just a few weeks from now. When the market has priced something in perfection, be sure to expect good deal of disappointment that will spook the market. I continue to advise to be cautious in this euphoric extreme!!