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MARKET-ALERT – Rumblings Up, Down, and Around Wall Street – Issue #414 dated December 18, 2016 – with Ray Dirks of RAYDIRKS Research and his team of securities analysts and money managers, along with the internationally-followed Web Sites – and, where Fashion meets Finance, and where Stocks meet Blonds.

Well…well…well. ‘Twas another exciting week in the United States stock market last week as the Federal Reserve lifted interest rates slightly on Friday– as investors had anticipated – and then the market moved up a little from the previous week’s close after an initial pullback.

Rumblings thinks the market will continue its strong rally since before and after Donald Trump’s November victory for the Republican party, and we recommend our readers/investors maintain a positive outlook for the next 12 months and into 2018, as we suggested in our last issue of Rumblings.

We will discuss further what common stocks to consider near the end of this issue, but first – let’s quote from “The Trader” column in tomorrow’s Barron’s, The Dow Jones Business and Financial Weekly.

The column’s headline is : “Stocks Mixed on Fed Hike, S&P Down 0.1%.

The column reads : “Stocks ended mixed last week after the Federal Reserve lifted interest rates for the first time in a year. In this case, “mixed” should be considered a victory.

The Fed had made plain its intention to hike rates at the end of the two-day meeting on Wednesday. The market, however, was surprised when the Fed turned ever-so more hawkish, with its “dot plot” indicating three rate hikes next year, up from two. Still, stocks handled the news better than might be expected, with the Standard & Poor’s 500 index dropping 0.8% immediately following the announcement but still finishing the week down 0.1% to 2,258. The Nasdaq Composite fell 0.1% to 5,437, while the Dow Jones Industrial Average gained 87 points, or 0.4%, to 19,843, its sixth consecutive winning week.

Contrast those muted moves with the market’s response to the last hike in December 2015. The S&P 500 rose 1.5% on the day of the hike, only to follow it with a 3.3% drop over the next two days. In hindsight, it was clear that financial conditions, including the weakness in high-yield bonds and expectations for slower inflation weren’t, shall we say, ideal for a rate hike, nd that the initial volatility was a harbinger of things to come.

Conditions are much better this time around, says Michael Darda, chief market strategist at MKM Partners. Inflation expectations have been rising, not falling, and what weakness there has been in the credit markets has been a result of higher interest rates, not concerns about the ability of companies to pay their debt. That the response was so restrained despite the fact that the S&P 500 has gained 6.1% since the beginning of November, should calm the skeptics. A flattish response to a more hawkish Fed is a bullish response given how much the market has run up,” Darda says.

And the market sure could use a pause. The response to Donald J. Trump’s election victory has been so binary – with financial stocks and industrial stocks running up, and health care and utility stocks lagging – that a break is just what everyone needs to ponder whether certain sectors of the market have run too far with the post-election themes. “Everyone’s realizing that Trump can’t just snap his fingers and make things happen,” says Michael Block, chief strategist at Rhino Trading Partners. “These things are not easy.”

Nor should they be.

Rumblings agrees with Mr. Block that things are not easy, and that’s why we suggest that our readers/investors do their due diligence, consult with their investment advisers, and then purchase stocks and sell bonds, focusing on companies like those in Rumblings’ list of Top Ten Stocks for 2017, which is available in last week’s issue of Rumblings.

Rumblings also suggests that readers/investors place no more than 1% of the money they devote to common stocks in the securities of any one company. It’s best to diversify!

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