TGIF! December 2, 2016

This sure was a November to remember. It started with all eyes on the Presidential election which brought a surprising Trump victory and it ended with an OPEC deal and a staggering rally that sent stocks to new, all-time highs. The DOW surged 5.4% in November reaching 19K for the first time in history. This Trump rally has been led by Financials, Industrials and Energy. The US infrastructure theme is working. The price action in Energy is key, because it has a huge impact around the globe. The price of oil spiked 9% when the Organization of Petroleum Exporting Countries (OPEC) reached a deal. The oil consortium plans to cut its daily production with intentions of driving the price of oil higher. Russia announced it will cut production too. It worked. Oil jumped back above $50 again, after the strongest week in 5 years for the prized commodity.

This continues to be a stock picker’s market. Price action has been so volatile in 2016. Industry leadership has rotated all year. Early on it was the defensive Telecom and Utility sectors that fared the best. Over the Summer Technology and Health Care were the leaders. But in November, it was decisively a DOW led rally where Financials, Industrials and Energy all charged higher while Tech and Health Care struggled. The question is how long can this dichotomy last. Our sense is the next stage of the Bull Market will be broad based, and Tech and Health Care will participate. Considering both sectors were so strong the last 3 years, it’s only natural for them to correct. During that time both Financials and Energy basically went sideways. The stuff beaten down the most will likely continue to lead higher. This reversal looks real and sustainable.

Even before the election, there were many signs that the US economy was accelerating. The revised GDP growth of 3.2% and another solid job number reported this week is further evidence that the economy has strengthened. It’s a lock that the Fed raises rates in 2 weeks. For the first time in years, interest rates are rising for the right reason. It’s very healthy. The financial plumbing is flowing freely. This is a really good thing. The Market likes it.

Now we officially enter the month of December, historically the strongest month on the year for stocks. Interestingly, both the DOW and S&P were down the last 2 Decembers. Guess when the last time they were down 3 consecutive. Give up? The answer is: Never.

Enjoy the weekend. We are all over it. We’ll be back, dark and early on Monday.


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