Still Trying To Decipher The Post Election Market

The weekly Market Update is posted at Alpha Baskets and includes the following;

After massive gains during the week of the election, domestic equities took a bit of a breather last week but still rallied. The Dow Jones Industrial Average only gained 11 basis points but the S&P 500 went up 0.81%, the NASDAQ rallied 1.61% and the Russell 2000 was the leader again with a 2.54% lift. The sector bifurcation from right after the election was less extreme last week and actually technology was strong last week after getting left far behind the previous week. Healthcare was in the red after strong gains (no Clinton maybe means no war on drug companies) which may have been a case of too much too soon. Financials continued to show strength expressing the market’s certainty for a rate hike in December. Predictions are obviously always difficult but this sort of back and forth between haves and have nots at the sector level for the time being should not be a surprise. The market is likely to bump along with the Presidential transition process until a little more certainty about what the new President actually wants to do.

West Texas Intermediate Crude had a strong week with a $4 gain after a large decline during election week. The initial reaction Trump as drilling friendly, more supply leading to lower prices. Similar to the above, the market may need time to sort out what Trump actually will do here and while that is going on the price could very well ping-pong back and forth as OPEC tries to work through implementing a production cut.

There was wild, and we mean wild, action in some of the domestically traded shipping stocks over the last few days with moves that might remind longtime market participants of Andrea Electronics in 1993 and then again 1997. DryShips (NASDAQ: DRYS) as the poster child for this event rose from $12 on November 11th to a close on Monday the 14th of $43, then to a close of $71 on Tuesday after having been as high as $97 that day. It was halted on Wednesday, opening much lower on Thursday and ultimately closing Friday at $11.81. We were unable to find a great explanation, Wells Fargo posited that it was a post-election trade that then fizzled out.

The yield on the Ten Year US Treasury Note continued to rocket higher to close at 2.33% on Friday. For a little context, one month earlier the yield was 1.77%. Rates are considered to be going up on expectations for a Fed rate hike as well as expectations that Trump’s policies will be inflationary (the current Barron’s splashes water on that second one). Global bond yields were mostly higher last week except for the German bund yield dropped to 0.31%. The French OAT upticked to 0.76% the UK guilt tacked on another nine basis points to 1.45% and the big news was that the JGB after many months with a negative yield went positive to the tune of four basis points. We would also note the 0.4% pop in CPI and the ten year inflation breakeven has hit an 18 month high.

Add to the list of markets reversing course last week, copper, zinc and nickel all sold off last week after a big post-election bounce on the expectation of infrastructure spending under the new administration.

Please click through to read the entire update.

I had to attend a meeting last week and got this shot.

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This one is from Dead Horse Point State Park in Moab, UT looking out over Canyonlands National Park.

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And a tarantula from our hike a couple of weeks ago.

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