Monday, March 6, 2017

US Equity Markets to New Highs - Again

President Trump’s address to Congress on Tuesday Night lit up US equity markets on Wednesday leading major indexes to set new highs with the DJIA closing the week at 21,005.  This was on the heels of more than a 300 point surge on Wednesday. Investors clearly like a more “Presidential Trump vs the one who shoots from the hip.” Helping set the mood was a slew of economic numbers showing positive results in both developed and emerging market economies. The Fed similarly earlier in the week cited good economic numbers as a reason to put a rate rise back on the table in March. It is important to note the rally was broad-based across US equities.

While investors this week are likely to focus on timing and effect of a Fed Rate increase (along with the most recent Trump news), keep a wary eye on European Elections and see how the Russian Gate continues to unfold, we continue to bet strongly on a recovery and continued bull market and would be buyers on any dips. Of particular interest are the themes that the President mentioned in his Tuesday night Address:  Infrastructure, Defense, Materials, Commodities, Financials and Energy – the latter two benefiting from regulation relief.   Additional themes include Transports, REITs and Retailing – all of whom stand to benefit from an economic recovery.  Mexican assets at some point will begin to look interesting as they bottom out. Also, it appears a synchronized global recovery is a reasonable bet.

To take advantage of these themes, we looking at our Quant Movers list as well as our Select Lists for Sectors and Global Regions. For example XRT, PEJ and PSCD all score higher than 7 in our reward measures for retailers. PSCC hits nearly 9 for small cap consumer staples. AMU, MLPI and PXI look attractive in the energy sector. In Financials, PFI, FNCL and JHMF as well as DXJF look interesting despite significant moves already. PKB, IYT, and FLM are poised to benefit from any infrastructure program or border wall. We suggest you look at both lists to ferret out additional opportunities.

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