Market Update: March 1, 2017

We start 2017 with the continuation of the “Trump rally”.  Last night President Trump delivered his first speech to Congress.  The speech is being applauded on both sides of the aisle with the DJIA responding favorably by moving up over 200 points.  The DJIA is now over 21,000, and the S&P 500 is closing in on 2400, close to my long term price target.  We have seen the market make 13 new highs in February alone, including 12 new highs in a row.  For now, stocks continue their euphoric rise and in many cases appear to be getting ahead of themselves.  There is no question that stocks will outperform in the decades ahead, but I am still concerned about the next 12-18 months.  

My market data and analytics are showing signs of exhaustion, with several of my indicators flashing sell signals.  If you recall last year, when sentiment was negative, my data was suggesting otherwise, which was why I continued buying good stocks.  That proved to be accurate and again I believe it to be accurate now.  I started this year with some market forecasts, namely healthcare outperforming, gold outperforming and a correction at some point in 2017.  For 2017, the healthcare sector is up close to 10%, gold is up close to 8% and the S&P 500 is up close to 7%. 

I have recently added some energy sector exposure.   I believe we are seeing a high probability set up for a move higher in this sector.  Fundamentally, after seeing earnings crash last year, many energy companies are seeing large upward revisions to their earnings forecasts.  Technically, there are several stocks in the energy sector that look very attractive.  I see global tensions continuing to increase in several of the world’s leading oil producing regions.

MARKET ALERT: Fed Raises Rates

Janet Yellen, Chair of the Federal Reserve, announced yesterday that the Fed will be raising rates by 25 basis points, to a range of 0.50 to 0.75%.  This is the second rate hike in a decade with more to come.  The Fed hinted strongly at further rate hikes as the economy begins to normalize.

The stock market had moved up to all time highs going into the rate hike.  After the announcement, the stock market sold off as the news was digested.  This morning, the market has again bounced back and is looking to move past all time highs again as the DJIA approaches 20,000.  It seems the “Trump rally” is set to continue on great expectations.  Eventually these expectations will meet reality.

MARKET ALERT: Fed ‘s Yellen says rate hike case has recently strengthened

There is no doubt the Federal Reserve wants to raise short term interest rates as soon as possible.  Today, Federal Reserve Chair Janet Yellen said the case to raise rates is getting stronger as the U.S. economy approaches the central bank’s goals.  She said:

“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.”

Looking ahead, the FOMC expects moderate growth in GDP, additional strengthening in the labor market, inflation rising to 2% over the next few years, said Yellen.  She further elaborated that based on this economic outlook, the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near their statutory objectives.

MARKET ALERT: Fed holds rates steady

The Federal Reserve FOMC left interest rates unchanged at 0.25-0.50.  Today’s policy statement was more optimistic in tone, as “near-term risks to the economic outlook have diminished”.  The Fed indicated that they would still like to raise interest rates sometime this year, even if only once.  Recent concerns about Brexit, with the UK voting to leave the EU, employment concerns and a weak recovery have put the Fed on hold for now.  The stock market has responded favorably to the Fed’s decision to keep rates unchanged as we have seen 6 new all time highs for the stock market this month.  As conditions continue to improve, the likelihood of another rate hike becomes more likely.

Please let me know if you have any questions or would like to schedule a call to review.

MARKET ALERT: The Markets are Hot

Over the past 2 days, we have seen the stock market, led by the Down Jones Industrial Average and the S&P 500, soar to new all-time highs.  The NASDAQ is not far behind and will likely break all time highs as well any day now.  I have been cautiously optimistic this year and have used market weakness to add to my positions.  With the market now breaking out to new highs, we could see the stock market move even higher still.

I have my technical research and indicators that have helped me navigate this market.  As I have noted in my newsletters, the technical condition of the market has been leaning bullish, which is why I have been adding stocks on weakness.  I would love to share my research and recent positioning with you.

MARKET ALERT: The United Kingdon and the EU

Today is the day that UK voters decide on whether to remain in the EU or leave. So far the polls are showing the UK remains in the EU. For most of this month polls favored the Brexit vote, suggesting a vote in favor of the UK leaving the EU. This polling created volatility in global markets, where stocks, bonds, commodities and currencies all showed increased uncertainty.  The pound and European equities were hardest hit, along with increased volatility across the capital markets.  I noted that the volatility created by the polls showing a Brexit vote was a buying opportunity.  In the weeks leading up to the vote, we focused on several themes to add value to our portfolios. We used some of our cash on hand to selectively purchase some stocks that finally provided nice entry points.  We were also able to use our fundamental and technical analysis to trade oil as we saw oil prices recently peak for the year.

For about a year, ever since this topic started making its way into the press, it has been my position that the UK does NOT leave the EU.  We made sure that our portfolios were properly positioned and with today’s move up, our recent market calls have been correct.  Please reach out to our latest market views and stock selections and to sign up for our newsletter.