• Sunday, December 15, 2019

Trump’s stock-market rally is annihilating bears

Discussion in 'Americas' started by Hamartia Antidote, Feb 15, 2017.

  1. Hamartia Antidote

    Hamartia Antidote ELITE MEMBER

    Nov 17, 2013
    +25 / 13,035 / -4
    United States
    United States
    Stock markets are up $3.1 trillion since November

    It may be high time for stock-market bears to throw in the towel. All the pundits and prognosticators side-eyeing (that means, a sidelong glance or gaze, especially when expressing scorn, suspicion, disapproval, or veiled curiosity, according to Merriam-Webster) record-breaking equity indexes must be feeling awfully close to the point of capitulation, right about now.

    Who can blame them, if that is the case?

    U.S. equities—heck, the global stock market—have resumed an elevator ride to new heights, after mostly stalling out once the elation sparked by President Donald Trump’s election victory in November abated somewhat.

    Now, the Dow Jones Industrial Average DJIA, +0.40% is flirting with 21,000 like a lonely bar patron during last-call for drinks. This after surpassing the psychological milestone of 20,000 20 trading days ago and ringing up a steady string of closing highs on Tuesday, along with the S&P 500 index SPX, +0.27% and the Nasdaq Composite Index COMP, +0.36% It’s worth mentioning that the Nasdaq on Wednesday was aiming to match its longest string of gains (7 days) since 1999.

    The most recent run-up is pegged to a revived promise by Trump to cut individual and corporate taxes, with the president on Thursday hinting at a tax-policy reveal (in the coming weeks) that he described as “phenomenal.”

    There are no paucity of reasons to be concerned that this rally could end in tears. MarketWatch has enumerated them, including citing Wall Street’s suspiciously low fear gauge, the CBOE Volatility Index VIX, +8.47% and heady stock valuations.

    But stock’s recent rally may be doling out a useful lesson to those who are wont to dip their toes into the meltup in equities: Don’t try to time the market.

    How bad is it for the bears?

    As of Tuesday’s close of trading, global stocks have added $3.36 trillion in market capitalization, and about $2.2 trillion of that gain is from U.S. stocks since the Nov. 8 election, according to data compiled by Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

    Silverblatt hit upon one of the factors that have allowed Wall Street to notch fresh records. “Usually you have some pull back. We really didn’t have that pull back, we held those gains, which is major,” he said.

    In fact, the S&P 500 has gone 86 trading days without a decline of at least 1%—marking the longest such streak since Nov. 24, 2006, and is closing in on the 105-day streak set on Dec. 15, 1996, according to Dow Jones data.

    Sam Stovall, chief investment strategist at CFRA Research, told MarketWatch that investors may be reaching a point millennials refer to as “fear of missing out” or FOMO. That is when the market may finally be getting to its bubblicious heights.

    For now, one consideration is how the market’s current valuation stacks up against U.S. gross domestic product. Stovall says that the U.S. stock market valuation as a share of GDP is at its highest level since the data series began in 1989 (see chart below).

    [​IMG]Source: CFRA Research
    How high can stocks go? That is certainly a question no one can answer definitively. But those who have been using options to bet that February would be a period of pain and anguish aren’t particularly giddy about this latest upturn.

    Of course, things can pivot on a dime.

    U.S. Treasury yields, which move in the opposite direction of prices, aren’t reflating at the same rate they did after Trump’s election, with the 10-year Treasury note TMUBMUSD10Y, +1.75%hanging around 2.5%. Gold futures GCJ7, +0.58% have risen, holding on to $1,227 an ounce, which suggests that there are some investors out there guarding against the worst.

    Both securities tend to be viewed as havens for investors seeking to hedge against market risks. Heightened inflation expectations also are playing a part in lifting those assets.