Clinton or Trump? Who the Markets Want

The happiest moment of my Monday evening was when Lester Holt said, “that concludes the first of three presidential debates”. Talk about painful. I was SO thankful that I had picture in picture so I could also watch an incredibly entertaining football game between the Atlanta Falcons and New Orleans Saints. High scoring and lots of action.

I thought Trump started off so well and I actually naively thought that it was going to be a real debate about policy. Silly me! It devolved into a reality show on both sides. While the #TrumpWon hashtag is all the rage on Twitter this morning and supposedly the polls called Donald the winner, I thought Clinton won but nothing overwhelming.

Trump had her on the ropes with her emails and nothing to show for herself after decades in government. She hit him good with his tax returns and all the personal nonsense. Trump clearly did not prepare enough and Hillary’s overly rehearsed one liners were mostly bad. Trump should have stuck to Clinton’s open wounds and not let up. Emails, Benghazi, immigration, higher taxes, ObamaCare, Foundation, etc. And what was that sniffling?

Clinton should stop arguing and let Trump rant. He digs his own holes. Tax returns, helping those who need it most, business bankruptcies, etc. What was that cord running down her back into that box? A mic? Hidden earpiece? Medical device?

Trump once again attacked Janet Yellen and the Fed for being political, as if they want Hillary to win. More nonsense. Without any factual base, I would surmise that the Fed is probably skewed slightly right of center and I 100% believe they do what they really think is right for our country. You don’t have to agree with them, but I don’t think there is any hidden political agenda. Fed Governor Lael Brainard is the exception as she has made three public donations to the Clintons.  Brainard clearly has an agenda to get Hillary elected so Lael can either succeed Yellen at the Fed or Jack Lew at Treasury.

Additionally, Trump continued to attack the Fed for propping up the markets with low interest rates and creating the biggest bubble ever. I find that to be 90% bunk. As you know, “bubble” is the most overused word in investing today. Everyone in my ever growing clown parade of doomsdayers, Soros, Druckenmiller, Icahn, Zell, Fink, Gundlach, Gross, Faber, Auth, Faber, Yusko, Singer and Donald Trump continuously use the word bubble and it’s absurd. Bubble equals greed. Mom & Pop clamoring for a certain investment. I would like to know what is being clamored for right now? And no, it’s not bonds. People don’t buy bonds because of greed. If anything, they buy them out of intense fear.

And to repeat a statement I have made more than a dozen times already, the markets really don’t care who wins the White House. By that, I mean that the market celebrates or pouts in a range of -5% to +5%, which is a just a bit outside the normal historic range. On the surface, Hillary means more business as usual and the same slow, uneven and frustrating growth. Wall Street is fine with that. Donald is clearly a wildcard, but I believe it’s mostly bark and no bite as he would have to work with Congress. Wall Street would eventually warm to that.

I do think that a sweep of the Oval and Congress by the left would be the worst of all scenarios for the markets as gridlock would be gone and the government could actually get something done. While it may be counterintuitive, the markets like gridlock and don’t like when things can get done and change.

Finally, I do think that career politicians and bureaucrats are terrified by the thought of a Trump victory as their ability to buy their way (in one way or another) to those cushy posts will be all but gone. DC corruption would be in for some trouble. That’s why so many of the GOP are supporting Hillary. The devil you know. Take care of yourself first. Those comments can easily be extended to the mainstream media as well who overwhelmingly support Clinton.

The bottom line from my perspective is that I can’t believe anyone changed their minds from that one debate.

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Bye Bye March & Q1

Last day of the month. Last day of the quarter. What a ride it’s been although if you fell asleep on New Year’s Eve and woke up today, you might conclude it was a quiet three months with the Dow up a few hundred and points and the S&P up 1%. As we all know, it was anything but dull. March is on pace to return more than 6% after an historically weak start to the year. This kind of strength usually spills over early in the next month.

Yesterday, I left off with a look at the sectors. Two of the four key ones, semis and consumer discretionary, continue to march higher constructively. After a huge rally off the January bottom, the transports are looking a little tired and unable to score a fresh high this week. Banks continue to be a head scratcher, spending the month going sideways. They REALLY need to step up and breakout!

Consumer staples and utilities on the defensive side are at or very close to all-time highs. Telecom and REITs are making 6 month highs. These four groups are proxies for a low interest rate, slow growth environment. The rest of the sectors look “fine”, but not incredibly healthy.

Finally, one of my favorite canaries in the coal mine, high yield bonds, have been dynamite since mid-February, which certainly helped lead to that huge stock market rally in March. High yield has taken a little breather of late and they absolutely must see fresh highs in April to keep the stock market rally going.

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And the 5th Pullback since The Bottom Ends

On March 21, I penned a piece calling for the 5th pullback since the rally began. I used words like “brief” and “mild” to describe what I thought was coming before the next rally began. As with the previous four pullbacks, all we saw was essentially two days of slight weakness before the bulls roared back.

And roar back they did.

Right before Janet Yellen released her speech on Tuesday, I did an interview with CNBC India regarding the Fed raising rates as well as the market’s short-term prospects. I want to thank Chair Yellen for listening to me and the market when offering such dovish (benign) comments regarding the need to raise interest rates right now.

The stock market certainly loved what Yellen had to say as the fifth pullback abruptly ended in a hurry. By the time the closing bell rang, the Dow Industrials, S&P 500 & S&P 400 all were back to the levels seen before the 2016 began. Only the Russell 2000 and NASDAQ 100 are left to regain lost ground, which should happen sooner than later.

I keep referring back to the “dark days” of 2016 when I was essentially the only bull left out there. I remember at both the January and February lows how CNBC and Fox Business couldn’t find but a few people to offer even neutral views, let alone bullish ones. My Twitter feed was overwhelmed with calls for a new bear market and a crisis worst than 2008. I am just wondering what happened to those folks. I have seen a few people who disavowed the rally and recommended selling the whole way up suddenly say that they successfully bought the bottom, in hindsight of course.

Anyway, stocks are seeing some very nice upside breakouts, but for me, I don’t think this is the greatest time to add risk to a portfolio. If you weren’t smart enough to add at lower prices, I wouldn’t compound your mistake with potentially another. There will be another short-term pullback sooner than later when people with cash will have that opportunity. The problem will be that they won’t take action at that point because they’ll look for a much deeper decline. If you absolutely must invest, I would look at the laggards here and have a solid exit plan before buying.

That’s it for now as I am heading to NYC for the day. Tomorrow, I will look at the sectors, commodities and currencies as there are some really nice short-term opportunities now.

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The 5th Pullback Since The Bottom is Here

Repeating what I said on Friday, stocks now have a mild headwind post the Fed announcement which last through this week. Couple that with the fifth short-term overbought market since the rally began on February 11 and you have the ingredients for a small pullback or pause to refresh. The rally isn’t over.

Three of the four key sectors (except banks) are dominating and can still be bought on weakness. While all of the major indices remain strong, I am most focused on the NASDAQ 100 right here as it should play catch up, either by rallying more over the coming weeks or pulling back less.

I wish I knew what to make of the healthcare sector, but I just don’t have any opinion. More than anything else, it looks like a proxy for Hillary Clinton’s winning presidency. The weaker this sector, the more likely it is that she will win.

As with stocks, crude oil and high yield bonds are also very overbought in the short-term. Both should see some weakness sooner than later before heading higher again. While gold has also rallied dramatically this year, there may be more at play than just a quick pullback. Intra-day volatility has expanded and it’s starting to trade on the sloppy side. A more meaningful bout of weakness would not a shock.

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