Market Direction: BULLISH alert
issued 11/10/2016
$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.
The Stock Market 1 Year after the Election...
On
the one-year anniversary of Donald Trump’s win in the U.S. presidential race,
the Dow Jones Industrial Average is showing its biggest post-Election Day gain
in more than 70 years.
The
Dow DJIA, +0.03% has advanced 28.50% since Nov.
8, 2016. That represents its best performance after a White House contest since
1945, when the blue-chip gauge was up 29.83% in a year following the election
of Franklin D. Roosevelt and his vice president Harry S. Truman. (FDR died
early his fourth term, putting Truman in the Oval Office in April 1945.) The
Dow made its debut in 1896.
The
table below from WSJ Market Data Group shows that Calvin Coolidge ranks No. 1
by this measuring stick, FDR gets the silver and bronze medals, Trump is
fourth, and Bill Clinton, fifth.
Trump ranks fourth, behind FDR but ahead of Bill
Clinton.
The
Dow’s big jump since Election Day was not exactly widely expected, with some
strategists saying on Nov. 9, 2016, that they “would be skeptical about buying the dip” in
stocks. According to the WSJ Market Data Group, which looked at data going back
to 1896, the average 12-month gain following Election Day is 6.04%, with
Republican presidents seeing an advance of 8.03% on average and Democrats
seeing a rise of 3.55%.
The
positive trend over the past year also holds for the S&P 500 SPX, +0.14% , which is up 21% since what Goldman
Sachs analysts described as Trump’s “improbable victory.”
“The
Trump rally ranks as the fourth-best 12-month gain following a presidential
election since 1936, trailing only Bill Clinton (1996, 32%), John F. Kennedy
(1960, 29%), and George H.W. Bush (1988, 23%),” Goldman analysts wrote.
For
the S&P 500, the average market return in the first year of a president’s
first term is 6.6%, according to Charles Schwab data that goes back to 1932.
While
the returns in Trump’s first year are significantly above that, “the question
remains just how correlated, if at all, market performance is with the person
in the Oval Office,” noted Kully Samra, a managing director at Schwab. “It
seems investors may have ceased paying much attention to day-to-day Washington
politics, and instead have shifted focus to the fundamentals of individual
companies and underlying economic data: a strong dollar, corporate earnings,
wage growth and employment numbers.”
Trump
has taken full credit for the equities rally, offering this assessment this
week: “The reason our stock market is so successful is because of me.”
Despite
that, his administration has had few major legislative successes to its name,
and it has seen some high-profile initiatives, such as repealing the Affordable
Care Act, fall short. Meanwhile, the factors that many analysts pin the rally
on precede last year’s election, or are not considered correlated with what is
going on in Washington, D.C. Even the rally itself is the latest step of a
multiyear move: The S&P has nearly quadrupled since its financial crisis
low in March 2009, early in President Barack Obama’s first term.
Wall
Street’s gains have been broad based over the past 12 months, with 10 of the 11
primary S&P 500 sectors in positive territory over that period. The only
industry to be negative, telecom, is off 5.4%.
However,
the gains have been primarily concentrated within two sectors: technology
stocks, up 42.2% over the past 12 months, and financials, up 37.5%. Because
tech stocks—principally the FAANG group of mega-cap
outperformers Facebook FB, -0.38% , Amazon AMZN, +0.09% Apple AAPL, +0.30% , Netflix NFLX, +0.28% and Google parent Alphabet GOOGL, +0.56% —are the largest market sector,
their gains have an outsize impact on broader moves. Per Goldman’s data, tech
stocks by themselves have contributed to 37% of the S&P 500’s rise over the
past year. (While Amazon and Netflix are closely tied to trends in the
technology space, they are classified as consumer discretionary stocks.)
The
outperformance of tech is another reason why the market’s gains over the past
year could be viewed as apolitical, as the sector has never been considered one
of the major “Trump trades,” or a part of the market seen benefitting from his
policies or legislative initiatives. Instead, the group has largely gained on
the back of massive revenue growth and better-than-expected earnings.
The
financial sector, on the other hand, is more of a Trump trade. It has risen in
part on hopes for deregulation, although it has also benefitted from a
rising-rate environment and improving macroeconomic conditions.
Recent
gains have had two primary tailwinds: The third-quarter earnings season, which
has come in ahead of forecasts, and hopes for tax reform. Details over a
potential tax plan were released last week, but it is unclear whether that
version could easily pass and be signed into law. Analysts, including Larry
Fink, chairman and chief executive of BlackRock Inc. BLK, -0.25% , have said that because optimism
over a plan has been baked into the market, stocks would see a “setback” if it fails to pass.
Schwab’s
Samra wrote that “even if we do enter a traditional bear market, it will likely
be unrelated to the current administration, unless political risk escalates, or
tax reform doesn’t come to fruition.” A bear market is often defined as a 20%
drop from a peak.
Goldman’s
political economist puts a 65% likelihood that tax reform will pass in the
first quarter of 2018, but added that further changes were likely before it
gets voted on. The plan would boost earnings if enacted, the bank’s analysts
wrote, but it “has a long way to go before becoming legislation.”
$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.
The all-time highs since our initial
recommendation to go LONG
this market. Here is how the markets have performed:
Stock Market
Direction Recommendation (9/21/2017)
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Dow
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up 1,242.89 points a 5.56% gain
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11/7/17
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Nasdaq
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up 372.83 points a 5.80% gain
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11/7/17
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S&P 500
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up 96.42 points a 3.86% gain
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11/7/17
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Related Link: http://www.stockmarket-direction.com/
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