Market Briefing For Tuesday, November 22

The unleashed 'animal spirits' mostly led by Financials and Energy; were given a breath of life as commodities (copper highs and a few of the miners) help our already suspected market build on recent runs as we approach what often is a mixed pattern around Thanksgiving.

For sure, talk of 'cooperation' at OPEC (remember it's mostly just talk) helped Oil (we warned not to get bearish at recent lows and not to get bullish, as a trader, when it gets back to the low 50's, as 'is' a bit likely if they can push it there before someone backtracks on fictional deals for 'production cuts'). Without Oil's move; none of this would occur.

So although we embraced it there's a predominant view on my part that Oil more than politics led the rally. I am also (as frequently expressed) extremely optimistic about the future for the United States; while absolutely aware of the heaviness reflecting on the debt to be added via huge fiscal stimulus, will provide fodder for the bears at a point some weeks (or even months ahead).

Though I'm a bit more sanguine about how this gets rationalized by Wall Street, now that America's prospects can presumably absorb and work through the burden prior Administrations and the Fed have saddled our Nation with, we should not be oblivious to stock markets getting ahead of themselves in the very near future. However, even if we get pullbacks in early-mid December that doesn't preclude getting a year-end rally; in essence the inverse of what we got last year (a brick-wall of resistance).

Bottom-line: There are many details I could review as are evolving but at this point the focus should be on optimism that the incoming team will use wisdom, rather than reactivity, to select 'Cabinet members' with the capacity to help unite rather than divide the Country. And I suspect the meeting with 'media' anchors today was intended to defuse the hostility so many continue expressing; and (if Trump's team was smart about it) perhaps explain (or try to differentiate) campaign rhetoric from reality in governing (sad that some media also use linear thinking excessively).

Of course simplifying corporate tax code, and repatriating money from abroad to the U.S. (they 'will' find a way that sufficiently entices Apple as well as others); may not be all. Perhaps they'll reform the IRS itself and that would perhaps (if done right) do a lot to assuage citizen jitters about the future. If we want to grow wages and jobs big time (and we must do that to offset the aforementioned fiscal-stimulus debt increase) there are just a lot of reforms that must be bundled together to achieve growth in a rapid way and eases regulatory compliance, tax filing, and lets private sector businesses focus more on growing businesses, not paperwork.

Observation: one of my first mentors in the early days (even before pioneering early financial television in California) was the late Gerald Loeb (Chairman Emeritus of EF Hutton at the time; who I often had coffee or lunch with in San Francisco at Hutton's perch for him on Montgomery Street or at the old Bankers Club atop the BofA tower). The venerable youngster Art Cashin (so fond of recollections) reminds me today of one of Gerald's axioms, which was:

"Whenever you find the key to the market, they change the locks".

I knew that; which is why I expected for weeks (if not months) that I'd be shifting to a far more optimistic forward stance 'if' we got a Government (less so which Party, but more so that we would ditch gridlock) able to really foment a new attitude, reflect the majority of working Americans and provide sufficient hope that not only genuine free markets but price discovery would become released, along with the mood of businesses.

So while we were quite bearish (and the market eroding or stagnant for many months) it all changed with America's 'Brexit-style' night; and new highs followed. So now many more are gravitating to the view that they found the key and it's onward and upward. Not quite so simple, as they also realize it can (and will) get ahead of itself.

There is no 'singular key' to this market; although there is a 'master key' to this, which is smart leaders, a functioning Congress and determined policies which focus revitalizing the Nation while subordinating concern many Americans rightly have about our inalienable rights as citizens. If, and that means seriously coming from the bottom of Trump's heart, as he promised, they do this intelligently with a laser-focus on the economy not personal biases some of his staff may (or in the past) harbor then it is going to be a tough slog in some ways (trade especially and calming tensions from letting Russia or Turkey), but can be robust anyway.

The leverage the President will have abroad is not insignificant and has more credibility than the critics who believe he hasn't a capability to alter the complex trade agreements. We'll see about that, as disappointment there (particularly NAFTA or China / TPP) could be an excuse for pause along the way. It's all difficult, as the euphoria we embraced instantly on the Election and until now will be tempered; though at least we know a new dawn at least allows for a better day, whether it proves to be quite as bright as we'd like, or something more hazy. What it won't be is very shady; because this is likely to be a more transparent leadership. So yes, near term expect patterns attempting to 'pick the locks' a bit; but unlike cyber-security I'm hopeful they won't disarm the motivation that's overshadowed the (obnoxious) rhetoric of the campaign with clear paths to a better future being unlocked. That won't prevent market corrections but likely will result in declines being shallower than otherwise.

Bottom-line: So how do we correlate Goldman Sachs estimate for the S&P to only advance 1% next year, with our optimism? First we don't need to piggyback Goldman like the majority on the Street do (with a bit of logic given their volume and influence; although often taking trades on the other side of their calls has worked, especially with Oil lately).

Second, we can get a 'recession' (likely in it since July as I'd mentioned before) but it becomes shallower due to the new National optimism (it's masked by the media, which will also be changing its tune over time). I would not be surprised that a combination of Dollar strength, currencies, and realization multinational profits will temporarily contract, may be the fundamental rationale for pullbacks, aside global 'Black Swan' risks (the geopolitical and Chinese situations may play into that realm).