France Leans Toward Capitalism

The Street yawned at a lot of good news last week, but make no mistake, the best performing sectors and individual stock winners speak to an economy that shouldn’t be ignored because of political intrigue.

• Consumer discretionary winners led by AutoNation (AN)  and brick-and-mortar retailers left for dead (Gap Stores (GPS), Footlocker (FL), and Best Buy (BBY))                  
• Financials led by regional banks, KeyCorp (KEY)
• Industrials led by Snap-on  (SNA) Tools and CSX Corp (CSX)
• Materials led by WestRock (WRK) and International Paper Company (IP)

In fact, I’ve often talked about the old-school analysis that involves a careful eye for demand in corrugated boxes and containerboards.  I think we’re at an economic inflection point that is being telegraphed by the main suppliers of the industry.

The market was held back on Friday, in part to anxiety over the French presidential election. The first round, however, went according to the polls (surprise), and that’s giving the market a lot of relief. The next vote is May 9^th and a lot can happen; for the moment, it looks as if the globalist could win big time, which means a threat to the Euro and EU fade.

• Macron 23.8%
• Le Pen 21.6%
• Fillon 20.0%
• Melenchon 19.5%

No matter who wins, this vote was a resounding defeat for socialism in the country where it appeared to be bedridden and unshakable.

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Last week, the earnings season got into the thick of it with 180, S&P 500 names reporting, including the biggest names in tech.

Washington, D.C. might grab all the attention this week, but make no mistake, corporate earnings and guidance are real news you want to base your investments on.

As for D.C., it’s going to be a hectic week of Executive Orders, votes, and horse-trading as the government verves toward closing while the GOP tries to score a legislative win for the White House.  

For all the noise, the Dow Industrial Average and the S&P 500 remain near all-time highs.  The Dow has come from 17,888 on November 4, 2016, and peaked at 21,115 on March 1, 2017.  Right now, the key resistance and the breakout points include 20,750 (on a closing basis), and the aforementioned all-time high.