The Trump Rally Has Legs; Friday, December 1 — Non-Farm Payrolls At 0830 EDT On The Number Of Net New Jobs Created In The U.S. In Month Of November; Fed Rate Hike In December All But Certain

The Trump Rally Has Legs; Friday, December 1 — Non-Farm Payrolls At 0830 EDT On The Number Of Net New Jobs Created In The U.S. In Month Of November; Fed Rate Hike In December All But Certain

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    I hope all of you enjoyed the Thanksgiving holiday and got some quality time with family and friends.  Just one quick thought and quote on Fidel Castro’s passing.  We almost always make people out to be better, and more accomplished when eulogizing their passing.   And, that would certainly be true with Cuba’s Fidel Castro.  However, it has been astonishing listening to some of the so-called ‘mainstream media,’ talk in glowing terms about a man who is no doubt responsible for many reprehensible acts that he either personally participated in, or ordered to be done.  Thousands died in terrible prison conditions, drowned while trying to escape to America, or lived in near poverty, all the while under a repressive and stifling regime that retarded economic growth, as well as greatly diminished their quality of life.  I found a quote from historian and writer Barbara Tuchman that sums up Mr. Castro about as good as any:  “Every successful revolution…puts on in time….the robes of the tyrant it has deposed.”  Enough said.

    Avi Salzman wrote in this weekend’s Barron’s that “the market action during the Thanksgiving-shortened trading week, indicated that the post-election {Trump] rally is no fluke.  Indeed, it has legs.  Wings even.  The DOW, and the S&P 500, indices rose every day last week,” he added, and both ended the week higher — a third week in a row — and both closed in record territory.  The DOW closed out the week up 284 points, or +1.5 percent to 19,152 points; while the S&P 500 climbed 31 points, or +1.4 percent, to 2.213 points; and, the NASDAQ ended the week up by +1.5 percent, to 5,398 points also a new all-time record.    And, not to be outdone, “the Russell 2000 index, which tracks small-caps, has been on an absolute tear,” Mr. Salzman noted, “rising 15.8 percent in the last three weeks.”  For the year, the DOW is +9.9 percent; while the S&P 500 is +8.3 percent; and, the NASDAQ is +7.8 percent.  The Russell 2000 is +12.45 percent from this time last year.

     “The market is pricing in a near-certainty of faster gross-domestic-product growth next year,” said David Wadell, Chief Investment Strategist at Memphis-based, Waddell & Associates.  If the current trend is for U.S.GDP growth of about 2.8 percent, “that could go to 4.5 percent pretty quickly,” he said.  “That’s why there is so much euphoria.  We’ve seen big piles of cash coming into the market.  People were so terrified of the election [which was grossly off the mark]; and now, all that cash is coming back in a hurry.  That’s why the market’s not going down, because everyone is buying every dip,” he added.  Mr. Salzman remarked to Mr. Waddell that this kind of euphoria usually means that the market has reached a top, and is ripe for a pullback, Mr. Waddell replied:  “Do not underestimate the value and amplifier of animal spirits,” Mr. Waddell replied.  “Animal spirits, once unleashed, can be pretty super-fantastic economic additives.”  

     “And, then in the style of POTUS-elect Donald Trump,” Mr. Salzman wrote, “It’s going to be yuge!,” Mr. Waddell said.

     “A cut in six to seven percentage points in the corporate tax rate,” something Mr. Trump campaigned on, “should result in a 10 percent increase in earnings-per-share for small-caps,” noted Jason Pride, Director of Investment Strategy at the investment firm, Glenmeade.  “And Mr. Trump has called for a lot more than that — a decrease in the corporate tax rate to 15 percent, from its current 35 percent. [Thus] the rally in small-caps is more than justified,” Mr. Waddell said.  

     The fact that we’re entering the six month period that historically is the best time of the year to own equities, doesn’t hurt either.  Of course, not everyone is so bullish; and, that’s what makes a market.  Geopolitical events can always upset the apple-cart.  The idea that the presidential election results in three states were somehow ‘rigged’ to the benefit of Mr; Trump seems preposterous and unfounded; but, if this recall effort were to gain traction, something like this would certainly be enough to cause a market selloff.  Barring something unforeseen however, I am firmly in the bull camp and think we’re going to see a steady market melt-up.

     Larry Jeddeloh, Founder, and Editor of The Institutional Investor, and who correctly predicted a Trump victory well before most, is bullish on a Trump stock market rally.  In a feature, and lengthy interview in this weekend’s Barron’s, Mr. Jeddeloh gave his investment picks heading into the fourth quarter, and into 2017.  He also discussed oil, the Euro, interest rates, etc., and I recommend you go to Barron’s for the actual interview.  Mr. Jeddeloh’s picks are:  PowerShares DB US Dollar Bullish (ticker: UUP); Enbridge (ENB); Energy Transfer Partners (ETP); IShares US Aerospace & Defense (ITA); General Dynamics (GD); and, ProShares Short 20+ Yr. Treasury (TBF).

     In addition to the Friday jobs number, investors will be watching Italy for signs that Prime Minister Renzi’s reform proposal that would give the PM more freedom and authority on economic and other measures will pass or not — voting is Sunday, December 3.  Also, elections that same Sunday in Austria will be a barometer on whether the populist movement which saw voters favor Brexit and Mr Trump — is still got more room to run.  OPEC Ministers will meet on Wednesday in Vienna, to see if they will implement the first crude production/supply cut since the 2008 financial crisis.  If the decision is to implement a cut, look for crude to get a boost in price — though the skeptics will rightly say the devil is in the details; and, cheating is likely.  The consensus on the street is for a November jobs number of 175,000.  All for now.  V/R, RCP

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