TGIF! November 11, 2016

It’s over.  The weekend is here.  We have some time to unwind, contemplate and reassess what just happened and where things are headed.  It’s a historic moment.  Business mogul Donald Trump will be our 45th President.  The Republicans will have leadership in the White House, the House of Representatives and the Senate.  Emotions are lifting, but are still lingering.  There’s excitement, there’s anger, there’s fear and there’s a whole lot of confusion and soul-searching.  That goes for both major political parties.  This was perhaps the most shocking and thought-provoking week of the decade.  It’s that big.  The Market responded in fascinating form.  The knee-jerk reaction was lower, and a lot lower, as evidenced by the DOW Futures plummeting over 800 points Tuesday night, before the circuit breakers kicked in.  But that changed very quickly in the regular session the morning after.  The DOW not only cut its losses;  it went positive and then accelerated to new, all-time highs.  This was indeed the best week for the DOW in 5 years.  It was a WOW week for sure.

The initial read on a Trump Presidency, as it applies to the Market, has been very positive for Banks, Materials and Industrials.  It’s providing reprieve for Health Care, particularly Pharmaceuticals and Biotech, which were under attack from the Hillary campaign.  It has not been positive for High Tech thus far.  Renewable Energy has struggled too.  There has been a significant bifurcation between the DOW and the NASDAQ, and Tech is leading the way lower.

A big question ahead is whether Trump will be pro-growth or a protectionist when it comes to free markets and trade.  His immigration commentaries suggest it will be more difficult for Silicon Valley to get top talent, because many engineers have come from overseas as Americans in general have lacked the necessary technical skills to fill jobs.  That’s a problem.  In addition, so much of Tech manufacturing takes place in lower cost countries.  Trump has said that he would target companies that send jobs overseas.  When you add in the fact that Tech has had a huge multi-year run, it is natural for some profit taking and wait and see approach.

Many comparisons are being drawn between this next phase of American history and the Reagan revolution in the early 80’s.  The last 2 days have seen Reagan type stocks roaring, namely Financials, Heavy Equipment and Big Blue.    The DOW is the clear leader, reaching new all-time highs, while the S&P and NASDAQ have lagged.  Small cap stocks have been strong as well, as most of the companies in that basket have revenues in the U.S.  Interest rates have spiked, with the 10-Year Treasury yield punching through 2%.  It hasn’t been this high in nearly a year.  Bonds had a tough week.

Donald Trump had a tour of Washington on Thursday, meeting with President Obama followed by a trip to Capitol Hill.  It sounds like it was very cordial.  Obama said he had an “excellent conversation” with Trump.  Trump called Obama “a very good man”.  This is fascinating stuff, because they sure didn’t have much nice to say about each other before.  Trump is sticking with his plans to cut taxes.  He is gaining a lot of momentum with Republicans who desperately want to ride his coattails now.  Politicians are still politicians.  We are hopeful that mutual respect will return.

Enjoy the weekend.  Your money is working hard for you.  The undercurrent for this Market is pretty strong and looks sustainable to us.  We’re all over it.

Thank you to the Veterans that have served our great nation.  We have great respect for you.

We’ll be back, dark and early on Monday.


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