Paul Sancya/AP

The Trump Rally has been on pause for two weeks, but its record since Election Day has nonetheless been close to historic. There's no doubt that investor euphoria is in part due to change in leadership in Washington and the promise in particular of less regulation.

Why it matters: Eliminating regulation is the most potent ways for government to boost economic growth, but the market may be overestimating what Trump can deliver without 60 votes in the Senate.

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Data: S&P Global Market Intelligence; Chart: Andrew Witherspoon /

The Trump rally has been dominated by the financial service sector, and independent banking analyst Chris Whalen says this is because banks have the most to gain from deregulation, in the form of a Dodd-Frank overhaul.

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Data: Mercatus Center; Chart: Andrew Witherspoon /

The cost of regulation: Wall Street has evidence to support its optimism. Research published by George Mason University's Mercatus Center over the summer estimated that the costs of regulation in terms of economic growth. It found:

  • National income in 2012 would have been $13,000 higher per person had the federal government added no regulations between 1980 and 2011.
  • It assumes that for every regulation added, one would be eliminated. Trump is promising to eliminate two regulations for every one added, a policy that could supercharge growth over the long term if faithfully implemented.

Not so fast: For one, the costs of not regulating business — like worse health and climate change — often don't show up in GDP figures.

  • The most significant EPA regulations claim to save thousands of lives — a priceless benefit for those helped by these rules.
  • To make large and swift contributions to American businesses and the economy, Congress would have to change the laws that support regulations. But with healthcare and tax reform higher priorities than financial regulations, it's not clear we'll get a Dodd-Frank overhaul anytime soon. As Whalen puts it, "Wall Street is way over its skis," when it comes to bidding up banks.

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