MARKET-ALERT – Rumblings Up, Down, and Around Wall Street – Issue #426 dated March 26, 2017 – with Ray Dirks of RAYDIRKS Research and his team of Securities Analysts and Money Managers, along with the internationally-followed Web Sites www.CorporateProfile.com and www.CPreports.com, where Fashion meets Finance, and Stocks meet Blonds.
‘Twas the worst week for the stock markets in the United States in a long time as the Trump Administration failed to follow through in a timely fashion on its promise of replacing Obamacare in the healthcare field in the United States with the Trump administration’s version of providing healthcare for everyone and reducing costs in doing so.
As a consequence, President Trump stated that his administration would focus for the near future on trying to implement budget cuts throughout the government and several other projects, many of which are opposed by many Democratic legislators.
Despite the weak stock market, Rumblings’ Favorite Stocks for 2017 performed well last week, led by Fusion (FSNN), the rapidly growing company in the cloud, which advanced by 21.5% on Friday to $1.74 per share, and Apple, the colossal high-technology company, which hit another all-time high and closed up at $140.64.
And now, let’s look at tomorrow’s “The Trader” column in Barron’s, The Dow Jones Business and Financial Weekly, where the headline reads : “Dow Weathers D.C. Chaos, Slips Just 1.5%”. The article starts off : “Late Friday, Republican leaders leaders pulled their health-care bill before it could be voted on. That hasn’t pulled the rug out from under the bull market, however.
Sure, the Dow Jones Industrial Average dropped 318 points, or 1.5%, to close at 20,597 last week, its largest weekly tumble since September, 2016. The Standard & Poor’s 500 index fell 1.4%, to 2,344, while the Nasdaq Composite slipped 1.2% to 5,829.
And that loss would seem to justify the talk on the Street that the failure to repeal Obamacare jeopardizes the Trump administration’s tax and infrastructure plans – and could cause the market to crater. The fact that the worst-performing stock in the S&P 500 on Friday was Martin Marietta Materials (MLM), which supplies the gravel and stones used in roads and other infrastructure projects, would only seem to add to the evidence.
Yet Friday’s drop was muted. The Dow, which was the biggest loser among the major averages, fell just 60 points, or 0.3%, while the Nasdaq rose 0.2%. “Markets breathed a sigh of relief on the notion that if Republicans can agree to (put the ASA aside) and move on towards tax reform and deregulation, then this is bullish,” says Jason Ware, chief investment officer at Albion Financial Group.
In fact, the major damage was done on Tuesday, when the S&P 500 fell 1.2%, ending its 160-day streak without a 1% drop. And while that decline provided ammunition for those predicting an imminent collapse, it was simply one bad day. “It is, of course, natural,” says Daniel Chung, CEO of asset manager Alger. “Things literally can’t go up forever.”
That hasn’t stopped the bears from looking for danger in every piece of data. Bank lending, for instance, has slowed since the election, and some observers have pointed to that fact as a sign that the animal spirits that were supposed to juice the economy have been a mirage. Deutsche Bank economist Tursten Slak, however, notes that bank lending is a lagging indicator, and that it usually follows the ISM Manufacturing survey with a delay. The fact that the ISM data has been rising – it recently hit its highest level in two years – suggests that bank lending could increase in the months ahead. “It’s a red herring.” Slak says.
And it just might be a sign that this remains the most hated bull market in history. While many investors believe the recent rally has been built on smoke and mirrors, Jason Trennert, the head of Strategic Research Partners, notes that on his checklist of nine factors that precede a market top, only one – slowing upward earnings revisions – is currently flashing red. As a result, any drop resulting from Trump’s failure to pass the health-care bill should be short-lived. “I could see the market going down for a couple of days,” Trennert says, “But I’m bullish.”
Rumblings remains bullish also, principally because we think common stocks in the United States will continue to perform well because of excellent prospects for earnings per share growth over the next several years. This compares with poor prospects for returns to investors on fixed-income bonds, which are likely to be only modestly above 1% or so over the next 5 to 20 years.
Rumblings suggests that readers/investors do their due diligence, consult with their investment advisers, and then purchase shares in Fusion (FSNN), Apple (APPL), and other companies in Rumblings’ Favorite Stocks of 2017.
Rumblings also suggests that readers/investors place no more than 1% of the funds they devote to common stocks in the securities of any one company. It pays to diversify….!
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