Short Take: Two Themes of the Day

By David Moenning of Sowell Management

Chief Investment Officer at Heritage Capital Research • Dec 9, 2016 at 9:28 AM EST

Stocks in the U.S. continued their ramp higher yesterday as the “deregulation theme” is developing as a big component of the “Trump Trade.”

Stocks in the U.S. continued their ramp higher yesterday as the “deregulation theme” is developing as a big component of the “Trump Trade.” In short, the President-Elect’s choices yesterday for Secretary of Labor and the head of the EPA are both outspoken critics of the policies currently in place. These picks, when coupled with a GOP-led Congress, suggest that rollbacks in regulations – especially in the areas of labor, environmental and banking/finance – are definitely on the new administration’s agenda. Now toss in the expectations for a lower corporate tax rate and the consensus thinking is clear: Trump’s approach will be pro-business and more specifically, pro-American corporations. As such, traders and investors alike continue to discount better days ahead for corporate earnings and the U.S. economy.

The other item of note on this fine Friday morning is the issue of “tapering” across the pond. Yesterday, Super Mario announced that the ECB would be extending their QE program through December 2017. But in the next breath, he said that the level of asset purchases would be reduced to €60 billion a month from the current €80 billion level, beginning in April 2017. Thus, the question of the day in Europe is whether the ECB expanded their monetary stimulus program or signaled the beginning of the end.

So far at least, European markets are none the worse for wear and stock futures in the U.S. are pointing to another green open.

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program.

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