bank Archives - Ninth Inning Investments

Caught off guard! I think this phrase wraps it up. After Donald Trump won the presidential election both voters and markets were caught off guard. The polls all but had Hillary as a shoe in for the oval office. Instead the exact opposite occurred not only with the election but how wrong the markets had it if Donald Trump pulled it off. Not only did the markets not crater, (although last Tuesday evening when the voting results were coming in the futures were tanking) stocks are back to setting records. Since the election, the Dow Jones Industrial Average (chart) hit an all-time high of 18,934, the S&P 500 (chart) is within striking distance of its all-time high, the small-cap Russell 2000 (chart) also hit an all-time high, however, the tech focused Nasdaq (chart) is lagging a bit due to the uncertainty of the new Trump administration policies on trade and how this could affect the technology space.

It has been quite a while since the markets have responded in such a bullish manner. Today marks the 7 straight day of gains for the Dow Jones Industrial Average (chart) led by industrials and banks. The banking index has exploded due to the hope that the Trump administration will relax or reverse the Dodd-Frank act which places overbearing regulations on the financial industry as a whole. Check out one of the most widely held bank exchange traded funds Symbol: XLF (chart). This ETF has moved up over 10% in the past week alone, simply unheard of. Other benefactors to the Trump presidency is anything and everything in infrastructure and materials. Trump pledges to spend over $1 trillion dollars rebuilding America’s infrastructure to include highways, roads, bridges, airports etc. It’s no wonder the markets are setting records once again.

Now what? Without question Trump winning the election is seemingly good the for the economy and so far for the stock market. However, as with any rally or sell-off for that matter, “reversion to the mean” typically occurs. I would be very careful chasing this rally or deploying any new capital. My preference is to wait until the inevitable pullbacks occur and look at the aforementioned sectors to consider any new positions. Of course it is always prudent to consult with a certified financial planner(s) before making any investment decisions. Good luck to all 🙂

~George

A three-week stock market winning streak has propelled the Dow Jones Industrial Average (chart) and the S&P 500 (chart) to close at record highs. In one of the most dramatic turn of events from the shocking Brexit vote to today, these key indices were breaking records all week long. The Nasdaq (see chart below) and the small-cap Russell 2000 (see chart below) also posted a strong week of gains.

I stand corrected! In my previous blog I referred to the fact that the S&P 500 (chart) had been stuck in a trading range and that upcoming earnings reporting season should act as the catalyst to break stocks out of this range. Furthermore, my view was that corporate earnings most likely would underperform hence a breakdown out of this trading would be more probable. Well here we are today at record highs and we haven’t even gotten into the bulk of earnings reporting season. The largest U.S. bank J.P. Morgan (NYSE: JPM) did however report their results this past week posting a profit of $6.2B. J.P. Morgan’s results came in stronger than expected which also helped fuel this week’s rally, especially in the banking sector.

As much as we were oversold leading up to and just after the Brexit vote, the markets now find themselves approaching overbought territory. Now the question becomes what to do next? As mentioned above, we are full steam ahead into the bulk of earnings reporting season which can come with plenty of surprises. From a technical standpoint I find it hard to commit any new capital into a market at record highs and do so with most of corporate America yet to report their results. I will be paying attention to the top-line growth of companies to get more of an accurate read how their business is fairing compared to their bottom line which can be adjusted in many ways that may not tell the whole story. My concern now is how can record highs continue if top-line growth is not there in a meaningful way? Let’s look to next week to see if the record setting trend continues, or a pause and reversal comes forward.

Good luck to all 🙂

~George

George Mahfouz Jr. Russell 2000 chart

george mahfouz jr Nasdaq chart

Ninth Inning Investments

bank

The Trump Rally Continues…

Record Setting Week!