Market Briefing for Thursday, January 5

Secular 'saturation' of consumer demand seems satiated in conventional retail, albeit not when you look at the post-Election demand for automobiles and consumer electronics. Again, like my comment at the Election's onset: if Trump won, this was going to go up after a bit of nervousness, not down. It was going to initiate a triumph of the Middle Class (whether it turns out to be that or not, of course) and cause us to become the most optimistic in years.

And no, that shouldn't evoke a concern about being 'contrary' because we'd rightly assessed the difficult false stability of a prior market levitated merely by buybacks and overly-expansive (and debt-building) monetary policies; of course in-absence of Congresses willingness to be fiscally responsible. As that evolved we shorted (faded) a number of rallies, successfully. The exceptions especially were Brexit, which I thought would pass, and Trump, who I thought (remember the LA Times/USC and IBD Polls?) had far better odds of winning.
 

So from that day on we've been overall bullish, allowing for a pullback here and there, of course. We're not cheerleaders, but we used a common-sense blend of technicals and recognizing early-on what would happen, especially to old-line stocks dormant for decades, if he won. That's not to say the prior Administration couldn't have embarked on pro-growth policies; nor consider Republicans blameless (such as a cobbled healthcare plan flawed from the start). The point was that everything would change based on 'perceptions'. 

There were and remain zero conclusions about whether or not his reign will succeed (of course I hope so; and any citizen who values the future beyond grovelling about what 'might' have been); but again from the start I viewed it as a foot being lifted from the market's jugular; which changes everything.
 

So is there a problem? Sure. The move is coming from already high levels; even though the entire year was jittery and defensive until the Election. But a lot of the 'overbought' indications are misleading, because of the reasons I've given regarding the potential (eventually) for so many core Industrial US stocks that have languished forever it seems. That means technicals really got distorted, because along the way both the S&P and the DJIA replaced a bunch of basic industries with more 'modern' technology-focused stocks. In fact that's why the New York Composite is at new highs; while the DJIA and S&P lag just a bit. As this evolves, small caps (even some that were 'micro' in nature but survived) may come to the fore, for percentage speculation.

Yes, at the same time that infers so many of the stocks that benefited so far are not so attractive 'after' nearly two months of projected advance overall. And sure, there's going to be corrective behavior along the way. But as I've said consistently; any correction (barring exogenous 'black swan' events of course) should be comparatively limited with no prospect of Armageddon or any of that so many of the extreme pessimists and naysayers suggest.
 

 

In-sum: The economic stagnation Summers or others talk about is valid in a sense; especially as relates to incomes, or too many extending themselves financially before the Nation has really embarked on serious new growth. At the same time 'perception' can become reality and markets discount future expectations, which is exactly what the S&P has done since Election Day.