While D.C. Goes Crazy, Wall Street Focuses

It was one of those sessions on Thursday where the rally was on autopilot, taking off at the gate, as major indices reached a certain altitude and descended in cruise control.

Constitutional crisis?  No, the scene on Wednesday was horrific. However, the 25^th Amendment chatter is just that, and not helpful for a nation that desperately needs to move toward any semblance of unity.  At the very least, an effort and acknowledgment that we need to put guardrails on the political discourse.

The stock market is looking past all of the D.C. drama and focusing instead on growth. Another reason the market isn’t stumbling from the new reality of Democratic control of the White House – both the Senate and the House. There are still a lot of ambitious goals that will not happen.

In addition to the needed 60 Senate votes for many key proposals, it would be tough to make changes during the pandemic, which requires trillions more in the stimulus. That includes extraordinary tax hikes.

A Reminder of President-elect Joe Biden's policy proposals and what they require to pass:

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Source: Briefing.com

Message of the Market

Market breadth was extraordinarily powerful, as the NASDAQ saw 537 new 52-week highs and only 6 new lows. In addition, the up volume was 600% higher than the down volume.

The Meek Shall Carry the Market

What makes the first week of 2021 so impressive is it’s happening with the two largest components dragging, while smaller sectors with tiny influence are up so much that it’s carrying the entire index. 

To see the chart, click here.

Stacking Chips

After the close, Micron Technology (MU) posted financial results, which beat Wall Street’s consensus on revenue and earnings. Moreover, management hiked its guidance, which gave the stock a slight lift.

Even with the Technology (XLK) sector spinning its wheels, semiconductor names just keep rocketing higher. The iShares PHLX Semiconductor ETF (SOXX) is in the midst of a multi-year monster rally that gained strength after breaking out on July 18, 2016. It’s up 300% since then.

The moral of the story is to ride these waves, rather than overthinking them and missing out on generational periods to change your life. It’s how very wealthy investors approach the market- they are not buying a bunch of diversified mutual funds.

Portfolio Approach

We closed a position to ring the register and free up cash this morning and added to Technology. It worked like a charm on Wednesday when we closed out a position, so we could put Fuelcell (FCEL) in the model portfolio.

Today’s Session

The futures are pointing to a positive across the board despite the miss in the job’s number.  December nonfarm payroll decreased by 140,000 with the unemployment rate remaining the same at 6.7%. Labor Force Participation also was flat at 61.5%. Average hourly earnings increased to $29.81, up 23 cents, and the average workweek decreased to 34.7, down 0.1 hour.

As the pandemic and Covid cases increased, leisure and hospitality lost almost a half million jobs in December,  of which 75% were in food services and drinking places (-372,000). Private education was also down. These reductions were offset in part by increases in professional and business services, retail trade and construction.