Trump To Meet With UN And Throw Down Gauntlet

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Posted: Sep 24, 2018 9:58 AM
Trump To Meet With UN And Throw Down Gauntlet

Friday was a mixed session as investors continued to seek value and mitigate risk by buying blue chip names like Boeing (BA) and Lockheed Martin (LMT).

In addition, I think the three-decade plus prediction of a Great Rotation out of bonds into equities may have begun.

These are reasons I think this rally has longer term potential, as money fleeing technology has not headed to the sidelines.  Instead, money managers are actually doing a thing they get paid to do and that’s find value as opposed to permanent window dressing with the same names in every fund despite the name of the funds and stated underlying objectives.

S&P 500 Index (3 Month Performance)

+5.91%

Communication Services (XLC)

-3.32%

Consumer Discretionary (XLY)

+4.88%

Consumer Staples (XLP)

+8.24%

Energy (XLE)

+0.07%

Financials (XLF)

+6.23%

Health Care (XLV)

+11.14%

Industrials (XLI)

+8.99%

Materials (XLB)

+4.60%

Real Estate (XLRE)

+5.21%

Technology (XLK)

+5.00%

Utilities (XLU)

+6.13%

 

High Flying Stocks

After the close, the S&P Communications Service sector officially replaced the Telecom sector.  Interestingly, the index was the worst performer and was the only sector in the red in the past three months.

This is critical because its weightings are many of those high-flying tech and consumer discretionary names.

Communication Services

  Sector Weighting

Company

3 Month Performance

12.5%

Alphabet (C Shares)

+1.5%

12.3%

Alphabet (A Shares)

+0.6%

17.9%

Facebook

-17.8%

4.2%

Netflix

-12.3%

2.1%

Twitter

-35.3%

With bond yields soaring, but the spread still narrowing, stocks in general have become something of a safe haven, which is surely attracting money from the bond market.  It’s unclear how much just yet.  Moreover, there have been numerous head fakes in the past, so the Great Rotation will have to be universally acknowledged before it gains traction.

Contrarian View

I’m also bullish because there has been so much apathy from both individuals and professionals. In January, individual bullishness was at 60% and major money managers was 55%, both swooned swiftly as the stealth rally began. 

Those big time money managers have begun to buy U.S. equities, but they have so much dry powder and so many other investments that aren’t working. 

It’s the Economy

Friday was another record -setting day on Wall Street, as blue chip stocks led the Dow Jones Industrial Average higher, and I’m saying rev up that diesel.

Forget surveys and the naysayers and follow the money.  We’ve learned that tractor trailer orders surged to 35,300 up 27% from July and up 141% from a year earlier.

Couple this with another record in class eight truck orders:  52,400 big rig orders are 153% better than a year ago and 274% better than August 2016. 

The economy is on the move…and it’s rambling down the road like a big trick-out rig.

Today’s Session

Lots of chatter about the official implementation of tariffs on $200 billion in Chinese imports, but that’s not news.  The Kavanaugh confirmation saga continues to take new twists and turns and will be the biggest news of the week. 

Moreover, President Trump will be addressing the United Nations and throwing down the gauntlet on bad actors in trade and military provocation.  It’s also hoped this will be the perfect backdrop to come up with a deal with Canada, which has been seen as very close for a couple of weeks.

I’m not sure how any of this will impact the stock market and doubt it has any influence on the U.S economy, but we’ll all slow down to rubber neck an endless stream of scandalous headlines (most will be false) and explosive sound bites.

Shout Outs

Big shout out to Tiger Woods.   Woods won the Tour Championship ending a five year drought.

A bigger delayed shout out to Private First Class Williams Hoover Jones and Master Sergeant Charles McDaniel, both soldiers died fighting the Korean War.  Their remains are the first identified from bodies recently returned by the North Korean government.