Market Inches Higher As 2017 Nears

“Red onion skins and New Year’s Eve have much in common – they both peel away to reveal new vibrancy.” – Alex Morritt

As the final days of the calendar year wind down the equity market continues to grind higher. Way back when, during the first two weeks of the year, if you had predicted equity markets were poised to end the year with double digit gains, well, let’s just say you would have been greeted with more than a little skepticism.  

Even with the nice performance, equities remain the most distrusted asset class. Naysayers accurately point out the various issues which any owner should always be aware of, you know, little things like valuation, sentiment, profitability, inflation, deflation, interest rates, the middle east, the current President, the new President, the sun, the moon, etc.  Instead, other asset groups: bonds, cash, CD’s, gold, real estate, private equity, hedge funds, commodities, are viewed as more stable and less unpredictable. Maybe, but investors who have stayed invested and persevered through the inevitable stomach turning fluctuations, have been well rewarded over the past eight years. Of course, the key question is what will happen during the next eight annums?  If you know, shoot me an email, please, as all help is duly noted and appreciated.

The markets were generally pretty quiet this week with trading volumes the lowest all year. Many are skeptical of the idea that inflation will begin to pick up and question the dramatic move of interest rates higher over the last few months.

Finish Line reported a poor number and Nike generally met expectations, but retail remains a much shunned sector.  During the gold rush in the 1840’s, many individuals struck out searching for gold but the business of selling picks and shovels proved stable and lucrative. The popularity of more stable and dependable businesses remains ingrained in institutional investors, hence the disgust with the retail area.

Oil stayed flat with gold being sold on the prospects for continued dollar strength and higher interest rates. The 10 year yield trended down and finished at 2.543 as the bond market firmed a touch. Looking forward to next week, I suspect we will see more of the same as tax loss selling beckons. The major issues for markets during the first quarter remain earnings, prospective legislation regarding corporate and individual tax reform and repatriation of capital, and whether a large infrastructure bill can be reached.

Finally, regarding the idea it is not how you start, it is how you finish, when Barack Obama took office in 2008, the Democratic party controlled all three branches of government. When he leaves in less than a month, they will have none. As his term winds down, his actions regarding the energy industry (declaring the Atlantic and Alaska as off limits) and Israel (not vetoing a UN resolution for the ban of settlements) leave plenty of people in both parties questioning his loyalty to our country.  

Donald Trump will become President and assume a divided land with a population skeptical of his temperament and ability to be a good leader.  As is the case with Mr. Obama, Mr. Trump will be evaluated on the overall progress of the country, or lack thereof.  In that light, you can make the case the same is true for all of us.  I hope you have a great holidays and a healthy 2017.