No fear or loathing in the markets

Do you recall the days when markets would pull back when there was a terrorist event in the world?

When investors would at least pause when the fired FBI Director was speaking on Capitol Hill about events and conversations with the White House?

Some of these market participants would even sell when the Federal Reserve raised rates. Speaking of the Fed — the ultimate backstop on falling security prices — it said last week it would begin pulling some $2 trillion out of the markets over the next 2 years or so.

What did we get from the markets?  Crickets

These investors used to be called skittish. But they seem to be gone. They have been muscled out by money that seems to know something. There are so many signs that the market is ready for a pull back.

What that something is that the markets know could certainly be helpful to small investors.

However, this is the time market pros say when the “dumb money” comes into the market. Small investors seeing new record highs most days and who have been on the sidelines fearing a repeat of 1987, 2001 and 2008.

I’m of the opinion that you don’t need to catch the last 5% move upwards, when the risk is you could get caught in a 50% downside collapse. It’s not a zero-sum game, you can take some profits and leave some positions for the possibility markets will go higher.

 

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Nothing to see here, please go buy some FANGs

The British voters threw PM Theresa May a big curve ball Thursday in the general election by not giving her Conservative Party the majority she sought, forcing her to seek to form a new government with minority political parties.

Also on Thursday we had ex-FBI Director James Comey testify before the Senate on his firing and the probe into Russia’s influence into the US presidential election.

Neither of these events had an effect on the markets, which is puzzling in the brief and troubling in the longer term.

To say the possible beginning of a presidential impeachment occurring in Washington and equities give you a day where as traders say “was a waste of a clean shirt and car fare,” is astounding.

As I wrote yesterday, market participants that I speak with see Friday as a possible tipping point for equities, looking at the futures market then the tipping point maybe the markets building support instead of falling.

Not to get into high weirdness, but how does the British, US  and global investors see a government crisis in London and Washington as a buying opportunity unless there are bigger buyers to buoy prices?

So let’s see how US markets close today and then we may get an idea of what is to come.

Markets shrug off Comey’s firing

I am only mildly surprised with the market reaction to President Trump’s firing on Tuesday of FBI chief James Comey after the trading closed.

I don’t want to make the Comey sacking seem to be a Constitutional crisis, however markets generally despise unexpected events and can whipsaw on the rumor, nevermind the surprise event.

On Tuesday night stocks futures opened 20 minutes after the firing and were down only marginally at 30 Dow e-mini points. The raw emotion of the event — even for algos — should have had a more dramatic reaction, in my opinion. Hell, the 10-year bond saw strong buying overnight.

My only explanation for this action (or lack thereof) is to amend an old surfing adage: You don’t want to be goofy-footed when a big tax cut is on the horizon.


An update on bitcoin. The digital currency traded above $1,700 after a sell off from $1,750 range overnight. It too had a sell off when the Comey news broke. This morning at 7am EDT its at 1,724.


Speaking of on the horizon, Thursday is a big day for earnings. Department stores come out with their Feb-May quarterly earnings. I don’t expect much good news, but analysts have reduced expectations so much that some may record a beat.

I’ll take a look at them a parse the underlining take away.

Markets love Comey, should you?

Well FBI chief James Comey’s decision that there were no new revelations in the newly found emails sent stocks in the US soaring, despite polls saying that key background states were tightening.

On the Monday morning before the presidential election, the Dow Jones industrial index was up 238 points, with the S&P up 29 points. Giving credence to the thought that a Hillary Clinton win would be market friendly. Stocks were having the longest losing streak since the 1980’s on the news that Clinton was being probed again over top-secret emails found on Anthony Weiner’s computer.

Now understanding that this is a polarizing election, but if a candidate has to rely on the FBI to say that there is evidence of wrong doing but not enough wrong doing to bring charges, do you consider that vindication? Do you then consider that the candidate is trustworthy to become president?

Up to the individual voter to determine. But should Americans take this market reaction as vindication that the “right” candidate may win, or has a better chance of winning?

Or should we look at this as the market celebrating a continuation of the eight years under Obama, where they did well, while the rest of America suffered from quality job losses only to be replaced by lower paying, part-time service jobs with little in benefits?

Are the markets aligned with the average American? Since a majority of Americans have little or nothing invested in the markets, I would say the simple answer is no.

The stock market is not the economy, it is so divorced from the sentiment on Main Street now with all the Federal Reserve involvement that true price discovery and investor sentiment has been lost.

Why worry of your investments, when markets are almost guaranteed to hit news highs?

So my reaction to the markets soaring on the FBI news tells me Wall Street sentiment is: Come on in water’s fine, no big waves coming to swamp us for four more years.

But if you are not in the water, then you may suffer like you did over the last eight years.

Placid markets show comfortability with Trump candidacy

Global markets appear to be sanguine over the possibility of a Donald Trump presidency as they react to the late Friday news that the FBI is reopening its probe into Hillary Clinton’s emailing sensitive material over a private server.

US stock futures are up slightly Monday morning pre-market as Asian and European market moved very little. Crude oil and precious metals are sliding as the dollar strengthens. Treasuries are being bought as yields come in slightly.

Certainly — as this election season has shown time and time again — this can’t be anything near the last shoe to drop as there is still eight days left in the campaigns.

However the fact that the markets see a Trump victory without setting off a selloff across all securities speaks volumes of Clinton’s prospects of victory.

It’s my belief that the FBI director James Comey made the announcement on Friday to get in front of what Wikileaks will come out this week.

This week will be highly volatile in the election, but how the markets react will be more of a tell-tale sign for possible election results.