With the election in the rear view mirror, uncertainty has morphed into action. The bond market which was beginning to crack, has experienced heavy selling. Yields on the 10-year and 30-year US treasury bond issues have jumped nearly 50 basis points in the last week. This has implications for both investors and mortgage rates. While the election may have accelerated the bond market sell-off, we all know that the proximate cause is expectations for an FOMC rate hike in December.
With money flowing out of bonds, stocks have been the beneficiary a sizeable reallocation of capital. Of course, within the world of equities, the moves have been quite telling.
On a macro basis, the Dow Jones Industrials (DJIA) and Russell 2000 (RUT) have vaulted to new highs. The tech heavy NASDAQ is feeling pressure as market participants are ringing up the register on technology shares to plow cash into the financial, biotech, restaurant and industrial sectors. The latter are sectors which are expected to benefit from the Trump administration’s policies and fiscal expansion.
It is not that tech shares are going to be targeted by Trump but it appears that the Obama administration was more tech friendly. In fact, we took profits in shares of Amazon.com (AMZN) before the election and Priceline (PCLN) after the election, moving the sale proceeds into financial and industrial sector stocks. Let the profit taking in tech run its course, but don’t mistake the asset reallocation as the second coming of a tech bubble being burst.
In my article in this weekend’s Bergen Record, I outlined my long term expectations for the market. Recall that I am forecasting a Reagan-style bull market as fiscal and foreign policy spur domestic economic growth. Many people – pundits and friends – are calling for the Trump rally to be short lived. Perhaps the recent rally will peter out and profit taking will kick in. However, longer term, I am taking a contrarian opinion to the naysayers and expect the market to rise on earnings and multiple expansion in the coming year.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AMZN, DIA, DDM, IWM. PCLN, QLD, TQQQ and UWM — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
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