As I have mentioned in the recent past, there were no discernible biases upon which you could trade equity indexes leading up to or after a Presidential Inauguration. On Friday, 2017 Presidential Inauguration Day, the Dow Jones Industrials (INDU) and the Standard & Poor’s 500 (SPX) both rose about 1/3%. That advance was similar to the 2013 Inauguration Day market move. It was also the first inaugural advance for a Republican president since Ronald Reagan’s second term began in 1985. Other than some anti-Trump hoodlums rioting in Washington DC, there were no events to spoil the nation’s event.
Now with the Inauguration having taken place, we can put the 2016 election cycle into the history books and get back to finance and economics.
Last week we used the lull in the markets to reduce exposure to the Russell 2000 (RUT) and add exposure to the SPX. Furthermore, we booked some short-term profits on positions in Wingstop (WING) and Dexcom (DXCM). With the proceeds of those sales, we put capital into Ulta Salon (ULTA) and Exxon Mobil (XOM).
On a short-term basis, the stock market is neither overbought or oversold. It has indeed traded in a very tight range since the New Year began. On a valuation basis, I believe that the markets are fairly valued but we really need to get through this earnings season to get a more accurate assessment of valuation. In the absence of any earnings or guidance surprises, I maintain my 2017 SPX price target of 2,600.
This will be the busiest week for fourth quarter 2016 earnings. The main event will be Alphabet’s (GOOG, GOOGL) earnings release on Thursday. We won’t be bored as there will be plenty of other companies of interest reporting results this week. The second estimate of 4th quarter 2016 GDP will be released on Friday.
I expect more tight ranged sideways action this week and then a possible eclipsing of the 20,000 level for the INDU next week. Once that occurs, the SPX will make it’s own run at 2,300. i would also note that without notice or fanfare, the NASDAQ 100 (NDX) set a new high and broke through 5,000 in this year’s first week.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long GOOG, GOOGL, IWM, UWM, DIA, DDM, QQQ, QLD, TQQQ, SPY, SSO, ULTA & XOM — 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
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