Indeed, as I expected, the markets got a bounce in reaction to President Trump’s speech last Tuesday. That bounce was more like a leap forward to new all-time highs for the major indexes on March 1. The last few trading days have been a classic bull market period of backing and filling. On those days, the markets opened lower only to catch a bid and then reduce most of those loses. This is again classic bull market action where buyers stand in the shadows waiting to snap up shares at lower prices.
One needs to understand that it is important to separate the useful from the useless news (note I did not use the word fake). Useful markets news is meaningful, which can move markets. That could be Federal Reserve Open Market Committee monetary action, earnings, economic data, exogenous events, etc. Useless news has no meaningful financial consequences and will be shrugged off by the market. It tends to make headlines but nothing much else.
The Trump speech and FOMC Chair Janet Yellen’s comments last week were useful and market moving events. The whole brouhaha over wiretapping is useless, until and unless there is some valid information which has market implications. The way to act upon useless information is to allow other market participants, who don’t know better, to sell on the news and then use the opportunity to buy on the dip.
This week we have some meaningful news to react to. Today, the markets, at least on a sector basis, will react to the new health care replacement act proposal. We have been buying stocks which should benefit from a change in the laws, such as Unitedhealth (UNH) and Stryker (SYK). The latter manufactures surgical products which are subject to a special tax under Obamacare. Second, the February jobs report is scheduled for dissemination on Friday. Current economists’ consensus estimates expect 190,000 additions to non-farm job payrolls. Lastly, more FOMC officials are likely to chat up an interest rate hike next week. In just a week, the odds of a twenty-five basis point rate hike for next week went from about 40-50% to 90-100%. The market seems to have already accepted such a hike as a certainty.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long SYK & UNH— 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.
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