There was more market resolve yesterday, as money continued to rotate into different sectors, but stayed in equities. The performance in NASDAQ would be a great year, so investors have to wonder if a pullback is overdue, or if this could be one of those mind-boggling years of huge returns.
- Dow Jones Industrial Average: +13.1%
- NASDAQ Composite: +18.9%
- Russell 2000: +16.2%
- S&P 500: +14.9%
I’m very intrigued with action in the SPDR S&P Retail ETF (XRT) Index. I think the American consumer, while more disciplined, is flushed and will continue to buoy the economy. We are overweight in Consumer Discretionary (XLY).
President Trump
There was something very intriguing with President Trump yesterday that I don’t recall seeing before. Two of his biggest concerns were the trade with China and security at our southern border. However, he still expressed optimism and patience.
China
There could be a “monumental” trade deal in about four to six weeks that would be announced at a summit. Note: it’s a “massive deal” and the “granddaddy of them all.”
Mexico
Mexico is trying harder, but the country must do more about caravans, migrants, using their country as a thoroughfare, and drugs pouring over the border. President Trump went on to say he would give Mexico a year to get it all together before closing the border and placing tariffs on their automobiles.
This calm and confident Trump was intriguing, considering his battles on Capitol Hill have only gotten more intense as Democrats are attempting a new tactic to get his tax records. I think the market would like this calmer Trump. Let’s face it, his voters also love his pugilistic style and his sense of humor (like that Biden Tweet yesterday).
I think the larger business community and organizations like the Business Roundtable and the Chamber of Commerce are gaining a greater sway with President Trump or some form of detente. Their leaders are less critical of the President and his tactics, including using tariffs. They will never admit these tactics are working, unlike anything the World Trade Organization (WTO) could have achieved, and he seems more willing to use some of their talking points.
Yesterday, President Trump even talked about China’s cost advantages. While it’s unlikely David Ricardo’s theory will guide future policies, it seems clear to me that both sides are trying to find ways to work together on issues, such as taxes and regulations, since they are a natural aphrodisiac that binds the relationship.
Today, it’s all about the jobs report. I think the number will be slightly better than expected. But there are signs of full employment unless a swath of folks formerly thought to be permanently out of the labor force decide to return.
Portfolio Approacho
There are no changes; however, we got aggressive on Constellation Brands (STZ) after management dumped lots of its lagging wine business. To subscribe to our Hotline service, click here.
Communication Services 1 | Consumer Discretionary 4 | Consumer Staples 1 |
Energy 1 | Financials 1 | Healthcare 2 |
Industrial 4 | Materials 3 | Real Estate 0 |
Technology 2 | Utilities 0 | Cash 1 |
Today
The market is reacting positively to the jobs report, which was on balance good, but it still has some concerns.
- Good News: 196,000 jobs and 3.2% wage growth
- Bad News: 224,000 left labor force Manufacturing -6,000
Join the conversation as a VIP Member