Need Mood Adjustment

Until Monday, there has been an unquantifiable positive energy; this palpable and contagious energy is driving the stock market rally.  We learned, however, that it’s not impervious to being tested and maybe even extinguished.

Face it, the secret to the post-election rally has been an underlying belief that President Trump would apply his laser-like focus on turning the economy higher. Investors aren’t naïve; they realize that all facets of the Trump agenda are of importance and that all promises must be kept.

In some cases, keeping those promises will mean that the mood can be hijacked and taken down a more contentious road.  There are forces out there with the ability to sway emotions and to trip up enthusiasm.  These powerful forces with high soap-boxes and big megaphones can stoke counterproductive energy, and bring back an element of doubt that was erased on November 8 of last year.

We need to remember that 40% of eligible voters didn’t bother and are mostly apolitical, which means their moods can be swayed without the benefit of facts or a deep investigation.

With that being said, President Trump held a round-table meeting with small-business owners from across the country and announced a major measure to reduce burdensome regulations. However, watching the tape of that meeting, the news on regulations put a floor into the sell-off, ultimately setting up the market to rally into the close.

President Trump is instituting a formula that eliminates two regulations. Every time a new regulation is implemented, it should mitigate future burdens. I want to see a meat cleaver taken to existing regulations without any strings attached.

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The same goes with the Dodd-Frank Act, where a serious intervention is needed that probably requires Congressional approval.  Financials were among the hardest hit during the session, signaling a growing frustration on the timetable of reforms.

I find it hard to believe that Republicans would wait until 2018 for corporate or individual tax reform, but that was the scuttlebutt that took some of the air out of the market’s enthusiasm. The bias is still to the upside, but clarity and a timetable need to be articulated to keep the party going.

All sectors, except the safe haven of utilities, took it on the chin Monday, but energy took the hardest hit and needs to find a way to rebound above $53.00 or it would be vulnerable to $50.00.

The Dow is below 20,000, but it’s essentially unchanged from a week ago after climbing off the low of the session. The worst session of the year wasn’t that awful but hopefully, it’s a wake-up call for the GOP.

After the close, earnings from logistics and truck operator Werner Enterprises (WERN), backed up so many other signs of a budding momentum as we enter 2017:

Expectations are rising for improved pricing in 2017, noting a more positive economic outlook, rationalizing industry truck supply, normalized current customer inventory levels, and the much anticipated supply-constricting December 2017 electronic logging device (ELD) regulatory mandate.

I had the opportunity to interview Michael Kneeland, CEO of United Rentals (URI); +69% from the election, and he continues to be confident and upbeat. Of course, he feels that there’s too much bipartisan support for infrastructure to not make it through. However, he’s not sure about tax reform.  He sees momentum in the economy and isn’t concerned about the Fed hiking rates – it would be for the right reasons.