Stocks Rally On Trump’s 4th Week In Office
Stocks are up four weeks in a row and have literally rallied every week since Trump took office. The market hit another fresh record high last week as buyers continue to aggressively accumulate stocks. Just to reiterate, this feels like the very early stages of a 1999/1929 style climax/blow-off top. Of course, we are open for any possible scenario that may unfold but, for now, we are in a very strong bull market and weakness should be bought, not sold. The strength is broad based as big money continues to flow into the major indices and several important sectors: Financials ($XLF), Materials ($XLB), Industrials ($XLI), Steel ($SLX), and Technology, just to name a few. For now, pullbacks remain very shallow in both size (small % decline) and scope (short in duration). Until that changes, the bulls remain in clear control. We do want to note that markets do not go straight up and are getting very extended to the upside. A nice light volume pullback would be very welcomed. The first level of support to watch is 10 day moving average, then the 21 DMA then the 50 DMA for the major indices.
Stocks rallied on Wednesday as Janet Yellen spent the day testifying on Capitol Hill. Economic news was mixed. The consumer price index (CPI) rose 0.6% in January, which was higher than the Street’s estimate for for 0.3%. Separately, Retail sales, rose 0.4% last month beating estimates for 0.1%. The Housing market index came in at 65, missing estimates for 68. Weekly mortgage applications fell -3.7%, which was sharply lower than last week’s reading of 2.3%. Meanwhile, the Empire State Manufacturing Index came in at 18.7, higher than the Street’s estimate for 7.5.
Thur & Fri Action:
Stocks slid on Thursday after 5 strong days of hitting fresh record highs. Energy shares lagged as crude oil pulled back. President Trump tweeted about the stock market and said, “Stock market hits new high with longest winning streak in decades. Great level of confidence and optimism – even before tax plan rollout!” Economic data was strong with weekly jobless claims holding near their lowest levels in more than 40 years, while the Philadelphia Federal Reserve manufacturing index hit its highest level since January 1984. Stocks opened higher but closed higher on Friday as the market continued to pull back from fresh record highs.
Market Outlook: Strong Action Continues
The market remains strong as the major indices continue to hit fresh record highs. The bulls have a very strong fundamental backdrop of monetary and now fiscal policy. The ECB extended QE in December and will print another 2.4T to stimulate markets and the global economy. The U.S. Fed only raised rates once in 2016, by a quarter point to 0.50%, which, historically, is still very low. On the fiscal side, Trump’s pro-growth policies are received well. As always, keep your losses small and never argue with the tape. Schedule a complimentary appointment today – if you want Adam to manage your portfolio or talk about your investment needs. Visit: 50Park.com