Thursday, February 23, 2017

Chart Talk {02.23.17}

Above is the current chart of the S&P 500 ETF, SPY.  The chart is from and you can double-click on it to make it larger if you would like a better view.   Today I would like to point out is what might have happened if you had listened to many of the investment or political pundits over the last nine months and let their advice determine the direction of your portfolio.  There's a trend here and I want you to pay attention.  What you hear on the news, read in the papers or see online is largely today reflecting a view that so far has been at odds with the market's behavior. First let's go back a bit in time.

Last summer as the vote over whether Great Britain would vote to stay in the European Union heated up, the media both here and over seas nearly all came out and stated what a disaster it would be if Great Britain left the Union.  Well they did vote to leave and globally it was a disaster....for about three trading days.  Both here and abroad markets rallied after the vote was cast.  Here from high to low over a two month stretch in the summer stocks rallied over 10%.  They weren't supposed to do that according to most of the experts.  Even if they did those same folks thought it was a sucker's bet and stocks would decline once investors realized the economic consequences of their decision.  Those folks are still waiting to be proven right.

Most of the same commentators felt the same way about our presidential elections back in November.  First off, most dismissed the possibility that candidate Trump could ever become President Trump.  Then they were sure it was going to be a disaster after Trump was elected President.  Instead the market has rallied almost 14% since then.  Stocks are also currently up now better than 4% since President Trump's inauguration.   

Now understand something.  Markets aren't up because investors necessarily love the President, voted for him or even agree with his policies.  The markets care about how his policies impact the economy.  In that regard, so far, the market's like what they are seeing.  They believe that an administration that advocates tax reform, repatriation of US assets abroad, less stifling regulation and a potential infrastructure spend are all positive for the economy.  As long as market's believe these things then stocks will stay on firmer footing.   Understand that markets are not making a judgement on some of Trump's social policies.  Markets for example don't care about transgendered bathroom issues, although individual investors likely have personal opinions about these things.  Rightly or wrongly, they care about economic returns and making money.  Folks who equate such things to the economy are missing the bigger picture as far as money and the markets.

Firmer footing does not mean we'll never see a correction or that stocks will continue on this kind of run.  Indeed right now markets are overbought and there is the hint of giddiness hitting investors that I haven't seen in ages.  That means stocks are vulnerable to and likely will have a correction at some point.  However, as long as investors believe the administration will continue to follow and be able to implement positive economic policies then corrections will likely be met with buyers at lower levels.  Investors will "buy the dips" on any pullback as long as their confidence in the administration's policies remains in place.

You will see little of this thought from most of American journalism or the opposition.  Our industrial media complex hates President Trump in a way that you have to go back to President Nixon to recall and the left hates him for many reasons.  One thing both fear is that his economic policies work ass that would be a repudiation of much of what each believes.  As a result they want him to fail.  As such they will portray nearly everything he does as evil and wrong.

I am not trying to endorse anyone's political position or critic what other people believe and I try to keep politics out of what I post here.  Indeed, there are aspects of the Trump Administration's policies I like and others that concern me.  I am a neutral in most aspects except those that can put our economy on a positive note.  Those kinds of policies I am for regardless of political affiliation.  The reason I have spent some time on the media is not to defend the President but to point out to readers here the disconnect between what's happening in the markets and what you may read in the press or see on the news.  Both increasingly try to portray the Trump Administration as a failure or an Administration that doesn't reflect American values.  Both ignore the market's performance and the millions who voted for the President.

Listening to the news since last summer would have cost you money.  It's as simple as that.

Back Monday.

*Long ETFs related to SPY in client and personal accounts although positions can change at any time without notice or dissemination on any other form of electronic media.