Donald Trump’s address to Congress on Tuesday is taking on the importance of a State of the Union speech when it comes to U.S. financial markets.

For investors relying on more than a year of campaign promises of a pro-growth agenda to push U.S. stocks to record highs, the dollar surging and bond yields climbing, the prime-time speech to House and Senate lawmakers couldn’t come any sooner.

“We need to see some details within all the policy talk,” said Sean Simko, who manages $8 billion in fixed-income assets at SEI Investments Co. in Oaks, Pennsylvania. “More specifics in terms of numbers or even a more defined timeline. If there aren’t specifics there, the risk trade might be ending.”

Though new life was given to some faltering Trump reflation trades by the president’s promise of a “phenomenal” tax plan earlier this month, investors say more is needed, especially with the administration designating the repeal and replace of Obamacare as its first priority ahead of a tax overhaul.

While it isn’t considered a State of the Union address since it falls within Trump’s first year, the initial speech to Congress has been no less important to presidents in the modern era. Barack Obama first spoke before both legislative bodies in February 2009 about the financial crisis.

Trump will propose boosting defense spending by $54 billion in his first budget plan and offset that by an equal amount cut from the rest of the government’s discretionary budget, according to administration officials. During a speech to governors Monday, Trump called his plan a "public safety budget" and promised that “we’re going to start spending on infrastructure, big,” without giving details.

David Fuller's view

Tuesday’s speech on the last day of February will be revealing in terms of both sentiment and liquidity.

In terms of confidence, investors will be looking for clear confirmation that their decision to bid Wall Street significantly higher following Trump’s election is confirmed by promises of tax cuts, infrastructure spending and stronger GDP growth ahead.  That is what investors are expecting and it should not be too difficult for Trump to provide these reassurances in a coherent manner.

The next question concerns the extent to which this has already been discounted?  If Wall Street weakens on encouraging economic policies and projections, we will know that demand has at least temporarily been matched or even exceeded by supply.  However, if Wall Street closes Tuesday’s trading with further rallies, we will have at least near-term evidence that demand still has the upper hand. 

Either way, I do not think that there is a significant near-term downside risk.