Investors Contemplating January 2017 After The Trump Rally

Investors Contemplating January 2017 After The Trump Rally

Investors Contemplating January 2017 After The Trump Rally

$DIA, $SPY, $QQQ, $VXX

After this late rally,aka The Trump Rally, driven by the US election drove stocks to new all-time highs, investors are wary that the market could be primed for a pull back or correction to start Y 2017.

The benchmark S&P 500 posted a 9.5% gainer for Y 2016 and around 11.5% on a total return basis, including reinvested dividends. That tops the single-digit increase expected by market participants polled a year ago, with more than 50% of the advance coming after Donald Trump’s November 8th Presidential victory.

The DJIA rose 13.4% for Y 2016, with a total return above 16%.

From here investors expect the S&P 500 to rise by mid-single-digits in Y 2017, according to a poll earlier this month.

Reflecting the renewed Bullishness for stocks, US-based stock funds pulled in $11.8% in the week ended 28 December data showed Thursday, marking a sharp reversal from most of the year.

However, investors see several warning signs for Y 2017, including:

  1. stocks at expensive valuations
  2. investors registering particularly Bullish sentiment, and
  3. the Fed primed to raise interest rates several times this year.

This market lifted in part by hopes for Donald Trump’s policy agenda could be deflated should any of those hopes be dented once he takes the Oval Office.

The S&P has rallied by more than 5% since Election Day, the DJIA rose 8%+.

As we head into Y 2017 there is the likelihood of some near-term weakness in stocks because of the move North. You will see some winning trades being taken off the table and a healthy pullback or perhaps a mild correction.

January has proven to be a difficult month for stocks with the S&P 500 falling at least 3% in each January of 2014, 2015 and 2016.

Recall, the beginning of Y 2016 was marked by the worst 10-day start ever for the S&P, on worries about a rout in commodities, a China slowdown and a potentially over-aggressive Fed after it hiked interest rates for the first time sinceY  2008.

Investors may have been holding off on selling their Winners until Y 2017 with hopes that any profits will be taxed at a lower rate under a Trump Administration.

Friends, Donald Trump takes office on 20 January, so investors will begin to assess how his administration will be able to fulfill its reflationary policies anticipated in the wake of the election and that helped drive The Trump Rally.

Remember there is no growth without inflation, Econ 101.

Friday, the US major market indexes finished at: DJIA -57.18 at 19762.73, NAS Comp-48.97 at 5383.11, S&P 500-10.43 at 2238.83

Volume: Trade was heavy on the NYSE where 1.05-B/shares exchanged on the final trading session of Y 2016.

  • Russell 2000 +19.5% YTD
  • DJIA +13.4% YTD
  • S&P 500 +9.5% YTD
  • NAS Comp +7.5% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.25) Neutral (0.13) Bullish (0.31) Bullish (0.31)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.32) Neutral (0.23) Neutral (0.17) Very Bullish (0.56)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.13) Neutral (0.10) Neutral (-0.08) Bullish (0.36)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.42) Bearish (-0.34) Bearish (-0.42) Very Bearish (-0.51)

Have a Happy New Year!

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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