Trump Stocks Led the Rotation

Who knew that the Dow would close at a new all-time high last Friday without being the headline of the stock market?

It was a wild session on Wall Street. The moves actually began earlier in the week when we started to see stocks and industries that have been out of the limelight perking up. 

It began as a trickle last Monday before becoming an avalanche on Friday. There were numerous factors culminating with this extraordinary session. 

Let’s start with Friday’s massive sell-off in technology. These stocks had been on autopilot for a long time; it’s easy to see why shorts wanted to pounce.  Of course, it wasn’t enough to go short but to have a platform to promote fear was also necessary.

That was the story with Nvidia (NVDA); raked over the coals by a well-known short on a different financial network.  It was a painful and unremitting attack on a stock that had recently become a fan favorite. 

I had subscribers take profits on the stock already.  I’m not arguing whether it’s overbought short-term, but I just have a serious issue with allowing opinion platforms to become shooting stands.

This same short has been generally wrong a lot, especially with Nvidia. Nonetheless, the stock began to give up gains, and selling triggered more selling.

As Nvidia began to free-fall, selling spread to other high-flying tech names as if a general epiphany struck traders.  However, to a certain degree, the selling was a relief for many money managers that might have wanted an excuse to sell for a long time.

Recommended

Not Even Oprah Could Save Kamala Harris' Word Salad Fiasco During Livestream Event Matt Vespa

Advertisement

Moreover, these stocks are still huge winners.  As for NVDA, we bought the dip before; if it gets out of hand, I’ll be the first to step up.  However, there is a more serious legitimate concern.

Goldman Sachs (GS) is taking aim at the five high-flying tech names, comparing Facebook, Apple, Amazon, Microsoft, and Google/Alphabet (FAAMG) stocks to big tech bubble names from the year 2000. The company is suggesting there are reasons to be worried when it comes to profitability and investor apathy, although the firm says cash flow, valuation, and overall cash positions are better than its previous peak.

Actually, I think Goldman Sachs is overthinking and under assuming with respect to where the world of technology is at this very moment- the future is now.

Investors fled these names, which are up immensely this year and over the past several years.

This is the great part of the story: investors didn’t run and hide with those gains. Instead, they put that money to work in blue-chip and value names that lifted the Dow Jones Industrial Average to an all-time high.

First of all, the so-called Trump Trade gets a boost.

The Trump Story

Last week was great for Trump stocks.

The White House touted it as Infrastructure Week. While plans were drowned out by the mainstream media’s search for sensationalism, the market listened. Look at the names that will be huge infrastructure winners: Martin Marietta Materials (MLM) and Vulcan Materials (VMC) are buys for those that can handle near-term volatility.

Financials, including regional names, continue to act great as well. A big assist, of course, has to be given to Republicans in the House for finally beginning to dismantle the Dodd-Frank Act.

Last week, President Trump visited the Queen City and Cincinnati-based Fifth Third Bancorp (FITB) that saw its shares rally 3% on Friday and 6% for the week.

There were stocks beaten down on bad news, but perhaps they were oversold?  Yes, even poorly run companies can have oversold stocks. Meanwhile, there are stocks down in sympathy with an industry or rival.

Department store stocks soared last week, in part to Nordstrom’s (JWN) talk about going private. However, there were a lot of winners, including Dillard’s (DDS) up more than 6% for the week.  I think this company will go private as well.

Here’s the bottom line: you must always have a balanced portfolio with the best names in several sectors, even those that aren’t hot as last Friday proved what’s hot can become cold, and what’s cold can become hot.

The rest of the market is breaking out with the Dow and the Russell and its great news for investors.

Congress Moving the Ball

President Trump has been more focused in the last couple of weeks, and it’s paying off big time. Not only is he pursuing pro-growth policies, but he’s also slashing and trashing all those Obama-era regulations.

His heartland growth agenda sparked rails and railcar markets; oil rebounded, and construction-related stocks moved higher as well.

All of this is getting the congressional Republicans – at least in the House to stop making excuses. In fact, the House is touting the 158 bills passed thus far as a sign of their support for President Trump.

The big question is how much pressure will be on Republican senators to get the really big stuff done?