1. Moving the Markets

An early sell-off in the S&P 500 was short lived as Wall Street traders and computer algos stepped in and pushed the index back above its unchanged line eking out another record high as an early holiday present.

The industrial sector was the driver behind this rebound boosted by a jump in orders for durable goods in October. Again, helping matters was the continued belief that Trump’s spending plan for infrastructure projects accompanied by reduced regulations and taxes will shift economic activity into a higher gear. Let’s wait and see what really happens once the man steps into office on January 20^th.

For sure, there is a lot of portfolio re-positioning going on as the shift from a slower growth environment into a hopefully faster one continues based on not only a different administration but also a different business environment. Be that as it may, I believe that, as usual, the major indexes have gotten ahead of reality and a pullback during the first 2 weeks of December would not surprise me one bit.

The markets will be closed on Thanksgiving and Friday’s session will be an abbreviated one.

Have a great Thanksgiving!

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1. Moving the Markets

The post-election levitation continued as the major indexes edged higher with the S&P 500 and the Dow taking out new milestone markers for the first time; i.e. the 2,200 and 19,000 levels, although with low volume during this Holiday shortened week.

Again, Wall Street’s focus remains on the Trump promises of less regulations, tax cuts and the mother of all infrastructure spending, which would benefit a  wide variety of industries. Especially tax cuts are in focus as they are assumed to boost earnings per share and increase the odds of a longer lasting economic expansion.

However, at this point it’s nothing but “irrational exuberance,” to use former Fed chief Greenspan’s famous words. So far, this rally is based on nothing but hope and should President-elect Trump fail to execute, or bond yields continue to spike more than expected, there will likely be a price to be paid in form of a sharp correction.

A big focus in the media has been the fact that all major indexes have closed at record highs on the same day. Well, as ZH pointed out, the last time this happened it did not work out so well, as the following chart clearly shows:

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1. Moving the Markets

The Trump pump continued with full force as all 3 major indexes set record closing highs today supported by energy and commodity shares. Oil prices jumped and managed to gain almost 4%.

There were no actual news events driving this rally other than investors jumping on the Trump theme of massive infrastructure projects while trying to figure out which sectors might benefit the most. Optimism prevails that Trump will ease regulations and reduce taxes providing further hope that equities are the place to be with both consumers and corporations benefiting.

Additionally, with bonds having been spanked as rates rose over the past week, the flow of funds has been out of bonds and into equities with data showing that $45.7 billion were moved into equity ETFs in the past eight trading days ending Thursday, the biggest inflow on record.

Color me skeptical but this euphoria assumes that Trump will not only actually implement these campaign promises but the market is betting on ideas that haven’t even been introduced to Congress yet. Then there is the notion that we can simply continue piling new debt on top of old debt in the face of a rising interest environment. New data shows that a minor ¼% increase in rates translates to an increase in annual debt payments of $50 billion. But that’s the future; for right now let’s enjoy the rally for as along as it may last.

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