stuff

I have no idea why the seasonal mutual fund-induced S&P 500 selloff hasn’t happened (so far, at least) this year.  Could be this is just an instance of the adage that the market tends to make the greatest fools out of the largest number of people–namely, me.   But even the best portfolio managers are wrong at least 40% of the time.  Not a profession for people who desperately need to be right about everything.

By the way, another curiosity about the annual mutual fund dividend is that holders strongly desire to have a dividend, even though this means paying income tax on it–but almost no one actually receives the payout.  Virtually everyone elects to have the dividend automatically reinvested in the fund.  In my experience, only holders of 2% -3% of shares actually take the money.  So there’s no need for the portfolio manager to raise cash.

This means the annual selloff is an occasion to do portfolio housecleaning plus optics for shareholders.

 

I heard an interesting radio interview of a prominent fixed income strategist the other day.  He said that the reason gradual money tightening by the Fed in the US has made no impact on the bond market is that central bankers in the EU and Japan are still creating new money like there’s no tomorrow.  That liquidity is offsetting what the US is doing so far to drain the punch bowl.  By next spring, however, both the EU and Japan will be at least no longer manufacturing new liquidity and may be joining the US in tapering down the excess money stimulus.  Once that’s occurring, we’ll see a bond bear market.  At the very least, I think, that would put a cap on stock market gains.  Until then, however…

 

September S&P 500 performance:

–I’ll post details for one month, the third quarter and year-to-date later in the week

–the biggest winners for September were:  Energy +9.8%, Finance +5.1%, IT +4.5%.  Losers:  Staples -1.1%, Real Estate -1.9%, Utilities -3.0%.  S&P 500 +1.9%.

ytd:  IT +24.4%; S&P +12.5%; Energy -8.6%.

Veterans Day …and my birthday!

Given that way back when I served in the 101st Airborne, it’s a double holiday for me.

…a post nevertheless.

 

Yesterday was Day 2 of the President-to-be Trump era.

S&P 500 gains were more modest than on Day 1, but the general pattern of trading was similar.  Action continued to be “conceptual” in nature, that is, industries that Wall Street thinks will benefit from an end to Congressional gridlock generally did wellIndustrials and Basic Materials, for example.  Both parties have long favored amped-up infrastructure spending, but Republicans had previously blocked any initiatives.  We won’t know what Democrats would do were positions reversed, but with Republicans in control of both houses any attempt to ape their past anti-Obama behavior will prove ineffective.

Financials continued to outperform strongly, both on the idea that finally getting fiscal stimulus will free the Fed to alter its super-low interest rate stance.  The market also seems to believe that some restrictive provisions of Dodd-Frank will be removed come 2017.  Whether this is good or bad remains to be seen (for what it’s worth, seeing that no one has gone to jail and the same clowns who caused the financial crisis are still in charge, my vote is “bad”).  If some shackles come off, however, bank profits for a while will be higher than previously thought.  (Note:  despite my just-expressed distain, I own JPMorgan Chase.  I guess I’m a Wall Streeter at heart.)

Healthcare was up as well, on the idea that the industry will have greater pricing power under Republicans.  Healthcare firms also generally pay corporate tax at the highest rates–the reason inversions have been so prominent in this sector.  Tax reform would presumably benefit these companies more than others.

Yesterday also saw sharp losers.  Telecom, Utilities and Staples were all down by over -2%.  IT came close to that mark, at -1.8%.  IT seemed to me to suffer from serious derivative-led selling.  Don’t ask me why.  The only sense I can see in the rest is that the US$ has begun to rise, potentially lowering the profits from Staples.  The idea that rates will be rising for sure, and faster than under a Hillary administration, is behind the weakness in bonds, Utilities and possibly Telecom as well.

Energy took the day off.

 

A closing thought:  if we were to roll back the clock by a week, liberals could have imagined that when Hillary won, disgruntled Trump supporters might organize anti-Clinton demonstrations in right-wing hotbeds.  These protests would have been labelled as typically Trumpish, and disgraceful.

As regular readers will know, I’m not a fan of Trump.  It seems to me, however, that the most effective way to influence Mr. Trump is to boycott the products bear his family name, not to cast doubt on peaceful transition of power to the election winner.