I took a bit more time off than I originally intended from writing My Gut Feeling. Since I last wrote, I made the cross-country trek to Henderson, Nevada, celebrated the Jewish High Holidays (there are still two more to come later this week) and endured yesterday’s Columbus Day Holiday session; which was like watching AstroTurf grow. Still through it all, one theme remained – the equity markets remain in the slow melt up mode of a secular bull market. Over that period, the Standard & Poor’s (SPX) 500 rose roughly 1.5%, hitting a new all-time high last week before backing away a little bit.
A few other observations are worth noting since I last published:
- The Small Cap Russell 2000 (RUT) Index turned from laggard to leader and hit its all-time high as well last week
- Insurance companies, such as Travelers (TRV) continue to rally from Hurricane Harvey lows.
- Banks are waking up from their slumber and have emerged as leaders. You can thank the FOMC, not company management for that action. Within the sector I only have faith in Goldman Sachs (GS) and JP Morgan Chase (JPM)
- Yields on the benchmark 10-Year US Treasury continue to rise. The yield is now 2.37% up about 25 basis points since the end of August. This move has had zero negative effect upon the equity market; contrary to conventional wisdom. On the other hand, Utilities have felt a slight impact from the move in the 10-year yield, but not enough to write home about.
- The market continues not to give a hoot about politics. Though, there is an underlying bid to stocks which is tied into prospective tax legislation. That is reflected in adjustments to forward earnings estimates. The biggest political losers are the media companies; but I will save that for another time and place. Look at Walt Disney (DIS) as a prime example.
The equity markets are entering the sweet spot of the year; the 4th quarter. On average, the SPX rises just over 4% in the 4th quarter, which represents about 50% of the average annual gain for the large cap index. It is also the best quarter in a post-Presidential Election year, gaining on average 3.25%. The last time that the SPX registered a 4th quarter decline was in 2012 and even that was just a modest 1.01%.
So, should you be thinking about putting cash to work in the equity markets, now is the best time. Please contact me if I can help you in that effort.
Those historical 4th quarter movements fit in precisely with my year-end target of 2,600 for the SPX. A 3.25% move from the SPX level of 2,519.36 at the end of September gets us to a year-end index level of 2,601.24. Thus, I feel confident of my 2017 year-end target.
I do expect some backing and filing to take place, but the impact will be fleeting and negligible. That is likely to occur during the upcoming earnings season.
Some final notes. We had a terrible event occur two weeks ago at Mandalay Bay here in Las Vegas. My son works there. His shift was over a half-hour before the massacre took place. He opted not to stay behind for dinner and perhaps join the concert. G-d was looking down upon him that day. I would also note that his best friend Jon was a first responder, of which we are proud. The mood remains somber in the Las Vegas metro area but is improving. As the NY Metro area still has lasting scars from 9/11; so will Las Vegas from the Mandalay Bay Massacre.
On the brighter side, the City of Las Vegas gets to celebrate the franchise home opener of the NHL’s Vegas Golden Knights. I will be entertaining in my season’s seats; sporting my Knights jersey. Hopefully, the team will extend its two-game winning streak at home.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long TRV, SSO & SPXL — 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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