Everyday, Everyday I Have the Blues
By John Stoltzfus,
Chief Investment Strategist
Trend Analysis
Market Strategy Radar Screen Weekly November 21, 2016
In this article:
- We expect that for all the talk and worry about the potential for some protectionist action
- trade treaties in the future may likely not become “less fair” or even “unfair” but rather fairer to all sides involved.
Take It Easy
Don’t let the sound of your own wheels make you crazy
We’re looking for a front-end-loaded week stateside where most if any activity (short of unanticipated surprises negative or positive) in the market happens early rather than later in the week.
It’s a holiday abridged week with markets closed on Thursday Thanksgiving Day and closing early (at 1pm) on Friday.
With more people expected to travel this Thanksgiving in the US than in recent years business people and politicians from Wall Street to Main Street and Capitol Hill are likely to take to the holiday week (outside of the “Bricks and Mortar” crowd who will be busy ahead of Black Friday and cyber Monday) as early as possible to gather with family and friends after a “year to date” that has hurled just about “everything and the kitchen sink” onto the landscape.
A gathering of family and friends, the Thanksgiving Day Parade and a Football game along with a start to holiday shopping should provide some respite over the Thanksgiving holiday weekend—at least until next Monday.
A burst of activity in the markets post-US elections as well as heightened emotional reactions elsewhere by a good number of folks on either side of the political aisle would seem to call for a few days of quiet and pleasant distraction before things pick up for a mad dash to the end of the year ahead of crossing the threshold into the New Year.
The week just ended saw further rotation in stocks as the post-election rally momentum slowed in some sectors on the realization that the outcome of tax cuts, infrastructure spend and less regulation aren’t about to happen overnight and will take quite some time to have effect even after they are implemented (notwithstanding execution risk).
The day to day news items on the ongoing selection process of cabinet members and other appointments in the new administration underscored the fact that “Rome wasn’t built in a day.”
The bond market’s drubbing persisted through last week with the 10-year treasury yield ending last week at 2.36%, its highest level since the summer of 2015 (see figure below).
The run up in yields came on the back of the market’s anticipation of the effects of fiscal stimulus programs that ironically are still on the drawing boards, and still “a twinkle in the eyes” of their likely progenitors while months if not years
from having the opportunity to attempt to produce their intended effect on the economy.
To those who might be unfamiliar with the bourses and their sometimes “knee jerk machinations,” we say, “welcome to the markets”.
Last week’s rotative process amongst the sectors of the S&P 500 saw some momentum leaving materials, industrials, health care and financial stocks (which had starred in the days immediately following the election). We saw no ominous or big
sell off in those respective spaces mind you, but rather a loss of momentum near term as money flowed back into technology, which had been somewhat ignored and fretted about post the Trump victory.
Perhaps denizens of Silicon Valley had worried some about their lack of support during the campaign for the winning team though perhaps they were at first too modest in recognizing how much the President elect depended on and valued the assorted tech tools that helped the Trump campaign “win the day”—and we’d add at significantly less cost to the campaign coffers than his opponent’s more traditional media-rooted campaign.
We expect that in the days ahead the bond market may experience a rally should it care to recognize that reflation at this early stage of what appears to be ahead will not begat “some kind of wicked” inflation as central banks worldwide (not
just stateside) stay vigilant against both deflation and inflation and as technology and globalization remain not just entrenched but deeply embedded in business and in the lives of global consumers.
We expect that for all the talk and worry about the potential for some protectionist action, trade treaties in the future may likely not become “less fair” or even “unfair” but rather fairer to all sides involved. This is particularly probable in a world in which technology has leveled the competitive playing field to such a degree that an emerging market player can readily compete
with long-established, century-old developed market multinationals.
In a world in which outsourcing and reshoring of capacity can happen at near lightning speed countries may find that the benefit of trade treaties lies in a mutually fair, globally-improved competitive landscape rather than in outdated treaties that barter promises of prosperity in exchange for foreign intervention and power and influence over domestic issues.
Stay tuned, and Happy Thanksgiving!
For the complete report, please contact your Oppenheimer Financial Advisor.
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