By Sue Chang, MarketWatch

Strategist says 'Trumpnomics' has yet to be priced in

This past week, the Dow Jones Industrial Average did something that it hasn't done in 10 years -- it managed to trade less than 1% in either direction for 53 sessions in a row. While this has sparked concerns that the stock market is running out of steam, the absence of wide swings does not necessarily portend the demise of the record-setting rally of the past few months.

"The market is in a definite uptrend and there is not a lot of volatility," said Frank Cappelleri, executive director at Instinet LLC, who argued that stocks are manifesting all the characteristics of a healthy market.

In fact, the lack of big action may simply indicate that trading is being driven by fundamentals rather than emotions.

"I would be more concerned if there were more 1% moves," he said.

The S&P 500 has been similarly restrained. The large-cap index hasn't had a 1% move up or down in 53 trading days, the longest since July 2014, according to the Dow Jones Data Group.

Since the market's breakout following the U.S. election, there have been several rallies and pauses, and neither has triggered a sharp selloff, suggesting that investors are unwilling to make big bets without a change of character in the stock market, said the strategist.

"People who have been wanting to take profits are pulling back their aggression given the persistent gains," said Cappelleri.

There is a lot of fundamentally good news for stocks to feed off -- the economy is on the mend, earnings are improving, and central banks, for the most part, remain accommodative.

"Overall, I can't think of anything that is a worry," said Karyn Cavanaugh, senior market strategist at Voya Financial, who predicts that any market correction will be shallow.

And despite the surge in the market on what is largely viewed as optimism over Trump's business-friendly policies, Cavanaugh believes that Trumpnomics have yet to be priced in given that the backdrop for stocks had already been improving even before the election.

"The foundation is there and any specifics [from Trump] will be good for the market," she said.

But even if he is unable to deliver as much as he had promised, stocks are expected to remain resilient.

"The Trump administration is likely to sweeten any negative policy or any vinegar with a teaspoon of sugar," said Cavanaugh.

To be sure, there is an element of uncertainty as details of President Trump's tax reform and fiscal spending plan have yet to crystallize.

"With potential big policy changes in Washington, political risk in Europe and geopolitical concerns, there are plenty of reasons to be uncertain now. However, we believe the markets and economy have learned to live with high uncertainty," Ethan Harris, global economist at Bank of America Merrill Lynch, wrote in a note.

As a result, he expects the markets to take any policy shock in stride until clear evidence of harm to the economy. For example, deportation of undocumented workers is likely to remain off most investors' radar until labor shortages start dragging on the economy.

Trump is scheduled to give a joint address to the Congress on Tuesday where is he is expected to highlight his successes since taking office last month and outline his ambitious tax plan and infrastructure programs.

See: Here's how analysts say you should trade Trump's speech to Congress (http://www.marketwatch.com/story/heres-how-analysts-say-you-should-trade-trumps-speech-to-congress-2017-02-24)

On Friday, the S&P 500 rose 3.53 points, or 0.2%, to close at a record of 2,367.34 (http://www.marketwatch.com/story/dow-poised-to-break-10-day-string-of-record-closes-2017-02-24) and the Dow also finished at a high, adding 11.44 points to 20,821.76, extending its record streak to 11.

(END) Dow Jones Newswires

February 25, 2017 09:33 ET (14:33 GMT)