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The market rally hit a series of speedbumps, all emanating out of Washington, D.C., except for the SNAP IPO, which traded more than its 200,000,000 share float in its first day of trading. I think the stock is overvalued already, but it obviously captured attention from a lot of investors, many I’m sure that have missed the rally and think they can make it up chasing shares of their favorite app maker.
I’m cautious on the stock, but I would like to see the IPO market open up; although, I warn investors shut out from years of private growth to be careful becoming the dumping grounds for many of the so-called unicorns.
This week saw a seismic shift in consensus on the monetary governing body’s next move when they meet this week. From almost zero, to almost a foregone conclusion, the street expects the Fed to hike. The good news is the day after that general epiphany occurred, the Dow rallied more than 300 points. The bad news is this would cast the Fed as an aggressive body ready to shoot first and ask questions later.
Sure, the economy is doing better, but is it doing so well to erase years of flaccid growth and inflation just as it is getting going? I think a March hike is a mistake, but it’s not a rally-killer.
Today, we get a parade of Fed speakers:
Commerce Department & Caterpillar
There is still a lot of confusion and anxiety over the raid on Caterpillar yesterday, which has been reported as part of an on-going tax probe. This morning, Commerce Secretary Ross hinted it might be over import rules enforcement.
Last week, President Trump was singing the praises of the company, and now, the federal government is making a public spectacle of an investigation that involves an overseas subsidiary. It is too early to know how it shakes out, but I’m confident the dip in its shares is a buying opportunity.
Speaking of Wilbur Ross, his comments this morning on leveling the playing field with Mexico on trade, including the need to lift the Mexican Peso, has turned that currency higher.
Stories and news continue to roll out on Attorney General Jeff Sessions meeting with Russian officials during the presidential campaign. President Trump is calling the entire episode a “witch hunt,” but Sessions has recused himself from any investigations into the Trump campaign connections with Russia. I don’t know the whole story, and there will be more, but it’s the kind of thing that seems like noise during the tricky period of trying to launch the economy.
It would be very impressive is the market closed higher today, but if it doesn’t, we are going to learn a lot. Many stocks are overvalued, but many are not in relationship to current and future growth and profits, so we want to see if there is any pressure to close out the latter. Of course, Fed speakers could hijack the session, which is another reason to keep our powder dry this morning.
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