Hello Everybody
Reporting from near Flower Mound, Texas, where I attempted to do my regular evening walk, only to return inside and send out a market update in lieu of freezing to death on a sidewalk in suburbia. The dispatch call would be “Frozen man with dorky reflector vest found in front yard of residence…”
The market rally has continued, with new All-Time-Highs (ATH) being attained by the indexes. The markets went upward from Nov-8 until Nov-22, then went flat until Dec-7, at which point we witnessed a huge surge upward on the SP-500 Index, on above average volume. The previously discussed 2200 overhead resistance level was breached on Nov-22, one day after my decision to re-enter TSP stock funds.
Let’s look at some charts:
The dreaded FOMC interest rate hike did not hurt the markets, the Dow Jones closed down 118 points on Dec-14, generating some alarm in my subscriber base that the markets would continue lower. They did not go lower, and remained stable. Why I am optimistic about things so far:
Mr. Donald Trump (DT) is assembling (in my opinion) a very impressive team, especially from a business perspective. Make no doubt that he considers “energy” as critical to job creation, and as a key component for economic and political vitality. Energy stocks will benefit from this Administration, in my opinion. He has appointed Texas Governor Rick Perry as head of the Department of Energy. Texas contains the HQ for Exxon, ConocoPhillips, Valero, and a variety of other smaller oil and gas companies. Factoid: Texas, a pro-business state, contains more Fortune 500 companies than any state, except New York. It is safe to say that Rick Perry understands business and energy.
If any agency exists that could negatively impact the energy industry, it would be the EPA. To head the EPA, DT is bringing in Oklahoma Attorney General Scott Pruitt, who has expressed frustration with prior EPA policies and positions. Another factoid is that Oklahoma occupies an important role in the energy sector, and is a state in which over 25% of its residents work in the energy sector.
DT has brought in Exxon CEO Rex Tillerson to be head of the Department of State. In today’s times where we must rely on others to have success with global security and economic goals, bringing onto the team someone who already has strong relationships with other countries is a smart move. He also ran a company whose economic success is dependent on positive relationships with OPEC countries. Rex Tillerson also happens to live near me, (yes, his house is much bigger)…I am happy to see a fellow neighbor occupy such an important post.
DT has selected Steve Mnuchin to head the Treasury Department. Mnuchin, a millionaire, and former Goldman Sachs senior partner, knows a thing or two about business and hopefully will bring that to his new role.
It is my opinion that DT is building a good team, and the markets will embrace this. De-Regulation, new business stimulus, and improved relations with other superpowers are not a bad thing, (contrary to belief), and I am very optimistic at this point.
As indicated by the below SP 500 charts, we have been in mostly accumulation mode in December:
While we may see some “pull back” in the coming months, I believe the overall market trend will continue upward. The best performing TSP Funds will be a toss up between the S-Fund and C-Fund, with the S-Fund likely outperforming. If we see Russia really assist us with situations in Syria, Afghanistan, and other hot-spots, this will breed further optimism in international markets and this can only be positive for things to come.
In sum, I remain 100% S-Fund until further notice. FYI that the next two weeks will see reduced trading volumes in the markets, with many participants out on vacation. Any up or down moves are to be viewed thru the lens of caution, it is best to wait for volumes to return to normal for an accurate analysis to occur.
The exchanges are closed on Monday Dec-26 and Monday Jan-2.
Thank you for reading and talk to you soon…
-Bill Pritchard
