Monday, February 27, 2017

Laissez Les Bon Temps Rouler

The Trump Rally marches on as US stocks continue to march onto new highs with the S&P 500 up 0.069% for the week and the NASDAQ eking out a rise of 0.12%. Nevertheless, no one piece of news seemed compelling enough to continue the run of the bulls, unless of course one plans the conquest and plundering of any one of the newly discovered planets this week by NASA.

Controversies on the topics of immigration, health care reform and invites to presidential press conferences dominated the week’s news – hardly the news to support economic confidence. Fed policy increasingly appears to be hawkish as well. Given this backdrop, could it be that the US stock market must be driven by the animal spirits unleashed by the excitement of the Trump Presidency? Sooner or later the excitement will die down and investors will focus on Republican deliverables…time will tell.

All eyes will be focused this week on the President’s first address to the Joint Session of Congress on Tuesday Night – coincidentally Fat Tuesday. Investors will be looking for details on any fiscal policy spending plans, tax reform, regulation relief, healthcare and of course the usual social topics of border control, immigration, etc. While animal spirits maybe driving the stock market, there appears to be a flight to quality by international investors to Treasuries and Bunds – probably due to concerns on the outcome of the French and Dutch elections.  Also, BREXIT appears to be heading to a harder landing than expected.  We expect Greece debt to begin to reappear in the headlines as well.

For investors betting on Reflation, Financials, particularly Regional Banks, Materials, and Industrials continue to be good bets. Looking at our ETFG Quant Movers List, we see a big move of over 31% for SEA – a bet on Global Trade Recovery as well as continued strength in Commodities and Energy with gains in FCG, PICK, XLE.   For pure play in Infrastructure, check TOLZ.

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