We will be hearing quite a bit in the next few days about the stock market's performance in the year since Donald Trump has been elected president. Unless you've been living in a cave, you'll know that the performance has been spectacular. Many pundits question whether there's any correlation between the president and what the market has done, but that's more of a political issue than an economic one.
The thing that's most important about this action over the past year is that no one -- and I mean not one single person -- predicted that the market would act this way. Some folks anticipated a rally, but no one expected that volatility would collapse and that there would be gains every month for the next 12 months.
Like many others, I expected that we would see increased volatility because Donald Trump was such an unknown quantity. Everyone knows the market hates uncertainty, but that didn't have any impact on the market action this time.
Of course, the question now isn't about what the market has done over the past year, but what will it do in the future. Anyone that thinks they know where we're headed after the past year has learned nothing from history.
Logically, this strong action can't continue much longer. The gains have far outpaced the fundamentals and there's plenty of stress in the bond market, questions about economic growth and other factors. Central bankers are losing the ability to hold the market up with monetary policy and there are many other negatives that could come to fruition. Doug Kass over on Real Money Pro does a good job of listing all the potential negatives that are lurking.
In the short term, the biggest potential negative is that the market might lose confidence in congressional Republicans' ability to pass tax reforms. We've seen a few small negative reactions in the past few days as concerns have bubbled up, but they've been shrugged off so far. The market has counted on tax reform since the election, and if that doesn't happen fast, there will be disappointment.
To me, the market's lesson from the past year is to forget the predictions and stay with the trend. That's the only thing that's working. We need to be aware of potential catalysts -- but until the price action confirms a shift in sentiment, the trend is our best friend.
(This column originally appeared at 7:24 a.m. ET on Real Money, our premium site for active traders. Click here to get great columns like this from Jim Cramer and other writers even earlier in the trading day.)
TheStreet's feature series "Inside Trump's First Year" looks at the biggest stories in business over the last year fueled by one of the most unpredictable presidents in history. Most importantly, TheStreet offers a glimpse into what could happen in 2018 on a range of issues -- and stocks -- in what will probably be an equally chaotic second year for Trump. Read more by tapping the photo below.
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