As I wrote on Dec. 19th, Dow 20K was not in the cards this year.
The Dow rose 11.7% from The Trump election to its all-time high close of 19,974.62 on Dec.20, and then churned lower.
This wall came with the backdrop of the Fed raising rates a week prior and the Trump administration coming into full view with final choices being locked in.
Now, Dow 20K is nothing more than a psychological milestone, which the financial networks focused on for TV theater, no more important than any other market technical level.
However, as the year winds down, there appears to be consensus growing that the beginning of 2017 will mimic early 2016 as the window-dressing of year-end passes and a strong selling wave will hit equities.
In 2016 the Dow lost 11.3% between New Years and Feb. 11. But from Feb. 12 through yesterday’s close the Dow rose 26.7%.
In early 2017, we also have the dynamic of people booking profits with sales, in the belief that capital gains taxes will be lower. A key part of the lift off in 2016 was the fact that the Fed — although jawboning about additional rate rises in early ’16 to follow-up on the Dec. 2015 hike — came clean that more hikes were on hold.
Again this year we had the Dec. hike and the jawboning of at least three additional hikes in 2017.
Therefore, I see history repeating itself in the markets for the beginning of next year, but the impetus for stocks to move higher have more to do with the first 100 days of Trump’s presidency, than the Fed early on.
I believe the Fed will not hike next year before June if at all in the first nine months of 2017.