President Trump, According to the Stock Market

So THAT happened. Whether you are pleased with the outcome or not doesn't effect our investing process. So many let politics and emotions cloud their investment decisions. That's not what we do here; we look for opportunities, we look for money rotation. There was plenty for everyone in the market this week. Some groups got brutalized and others appear to be headed to the moon. Once this honeymoon period ends things will balance out a bit, but the initial reaction is notable and we must adapt to what the market is telling us.

In full disclosure I did not vote for The Donald. Part of me really fears how this will play out with foreign policy and how many will be effected State-side. But another part of me thinks we should give him the benefit of the doubt. It is possible everything he has said over the past year + continues forward and shit really hits the fan. Its also just as possible that he becomes much more presidential and actually does a really good job of improving our economy for the dwindling middle-class.

The stock market sure voted for how it thinks this all plays out. We saw Banks indiscriminately rip higher, Transports were breaking out even before the election, industrial metals and basic materials saw big rallies, healthcare got a big relief, while safety trades, bonds, and rate sensitive groups got absolutely crushed. Heavily U.S. based Small-cap stocks dramatically outperformed as well.

Banks

My growth scans this week were absolutely over run by Regional Bank stocks. I got some of the strongest readings I've ever seen in my scan results this week and more than 70% of the opportunities where from Regional Banks. Insurers and the large institutions also saw big inflows. We've owned JPM and BRKB since August, the action hasn't blown the doors off but the relative strength while the broad market corrected was very notable.

JPM

BRKB

Warren Buffet's Bershire Hathaway would seem to hit it out of the park in a Trump market. His portfolio remains heavily weighted toward Insurance, Energy, and he owns an entire railroad company. Not to mention whatever the heck he gets out of his BAC deal, BRKB appears to be a great way to position in the newly developing environment.

I added one Regional Bank name to our growth portfolio this week, WAL

WAL

The past two weeks have seen select Transport stocks break above large consolidation bases. The strength in IYT since early October has been very apparent to me and this week we got confirmation of that behavior. See my previous post on this Transport structure here.

IYT

Those 5 tight weeks were the tell here. While the market was falling apart arguably the most economically sensitive group didn't even budge.

ODFL

FDX

ODFL and especially FDX had broken above large base resistance well ahead of the election. Once the news hit they continued to lead the way higher.

UNP appears to be lagging the group but is on the verge of a large breakout as well

UNP

Infrastructure stocks did very well also: Steel, Copper, Builders, Coal. Apparently some building is going to take place.

AKS

JJC

FCX

MLM

CLF

Healthcare, specifically Biotech got some relief from the recent rhetoric.

IBB

This still doesn't appear to be anything different than a range bound market. It sells off into the lows and spikes back up, rinse and repeat until it breaks.

Bonds and rate sensitive stocks continued to be sold. This is really not a new trend as they have hinted this way for weeks, but the move this week affirmed that prior rotation. It almost had a whiff of panic to it. Everyone trying to squeeze through the door at the same time, this is what it looks like when the dam breaks.

TLT

XLP

It is possible that this was the downside blow-off Staples and Bonds needed after such a strong run. I can count a potential 5-waves down on the weekly trend, which would suggest an intermediate term low could be in place. But we have no evidence at this point of this being a high probability, its purely hypothetical. The trend has been down since August and hasn't exactly slowed down as of yet.

Small-cap stocks saw follow-through on the recent breakout throwback

IWM

I'm not sure what all this means or if it reverses or continues, nobody does. All we can do is position with the big money; flow with the strength and avoid the weak. There were significant adjustments this week in the pricing of assets. Typically these dramatic moves have staying power.

Thanks for reading
-ZT