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Morning Commentary

Mood Swings

By Charles Payne, CEO & Principal Analyst
2/7/2018 9:20 AM
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What a Bounce, What a Ride, What a Market….Hang Tough!

Mood ringThis was the worst time to break out my old mood ring, which gave out by the closing bell on Tuesday after running the gamut of emotions in the last two trading sessions.

There were brief moments of light blue (relaxed) and dark blue (very happy), but most people are mostly relieved for the moment.

I didn’t actually wear my mood ring, and I was never nervous or fearful, but normal market swoons these days involve numbers that haven’t been normal.  That’s because the market is something of a victim of its own success.  The Dow off 1,000 from current levels wouldn’t cause more than a small ripple at the same percentage a few years ago.

Sure, 1,100 Dow Jones points screamed across headlines, and sold more newspapers and paid clicks than the fact that the session was the 108th worst single-day.

Of course, big numbers grab everyone’s attention, and then you have additional motivation like the disdain for the President who initially had to watch the media give credit to (for the rally) his predecessor until last Friday was ripped up when the rally slipped, and the Dow finished down an ominous 666 points.

Then the stock market became the property of the current White House occupant and his policies.   Everyone knows the market hates lower taxes and fewer regulations, and corporate America must really miss being demonized, and profits become a four-letter word because they’re only shared with shareholders, not stakeholders.

The 4.5% decline on Monday was the worst session in six and a half years, so there is no doubt investors had become complacent. There was another message to the sell-off, and that was “stay out.”  I warned for a couple of weeks there was an attempt to shake out weaker hands of folks that only just came back to the market.

One of the reasons I like President Trump talking about the rally - and why I think he should have come out with full-throated support on Monday - is it’s one thing that any American can get involved in and change their lot in life. Why only let the elites have ownership in the places we shop, eat, sleep, and live in, or the tools and products we use to tend our land?

According to Gallup, household ownership of stocks has edged down to 54% from 2009 to 2017, and from 62% in 2001 - 2008.  Other measures suggest only 13.9% of Americans have direct ownership of stocks while another 35.4% have ownership through vehicles like 401K plans.

I don’t think the elites like having regular folks crash their party because from time to time, they crash the market.

It’s the Economy

That said, for all the fretting about computer programs, high-frequency trading, and all these fancy investment vehicles that go belly-up, and periods of wild gyrations that periodically swoop in like locusts, the market will go up and down based on underlying fundamentals. There are lots of ways to measure valuation, but in general, a surging economy should support a surging stock market.

Measuring the economy based on corporate profits is what should have been moving the needle the last couple of weeks. 

At the open yesterday, strong earnings beats from General Motors (GM), Tapestry (TPR) (the old Coach), and Micron (MU) painted a different picture of the market and economy than a down -570 opening print for the Dow Jones Industrial Average.

After the close, Disney (DIS) and Chipotle (CMG) beat on earnings while Pioneer Natural Resource (PXD), Akamai (AKAM), and Snap (SNAP) blew away the Street on revenue and earnings.

Today’s Session

Wall Street losing' dough on every share

They're blaming it on longer hair

Big men smoking' in their easy chairs

On a fat cigar without a care

‘People Make the World Go Round’

Stylistics

The big boys are riding this rollercoaster out while their machine – driven programs do the bidding of shaking out smaller investors.  Can’t blame on longer hair, although, the generational divide these days sees young adults investing big time in things like crypto-currencies. 

People make the world go round and software makes the market a rollercoaster.  We have an extensive buy list, and I bought three stocks yesterday (note: I rarely add individual names to avoid conflicts, so normally I buy once or twice a year, while the rest rides in funds I would much rather actively manage).

Tax Reform Dividends

More Main Stream Benefits from Trump Tax Reform

"As a result of changes in U.S. tax law" Chipotle's (CMG) 71,000 employees will receive:

Let’s keep our wits and make this dip work for outsized gains.

 

 


Comments
I agree with your logic Charles. I am 75 yrs. of age and have plenty of years of securities experience, both good and bad. Our greatest President Trump, in many decades, is the best ever for our economy, "making America Great Again", and keeping his promises he made prior to his election.
I agree with your commentary and appreciate the great job you are doing!
Blessings be upon you Charles!



Richard T. on 2/7/2018 10:42:50 AM
I don't believe the Gallup poll as many people have mutual funds that they don't understand and say they don't own any stocks. As part of your educational part of your show, you should show people who owns certain stocks. Teach them to go to their home page and find the box where you can look up stocks and from there to ownership, float, etc. I just found out last week that Sirius XM is owned by 71% insiders and I've owned the stock 12 years.

Joe Thummel on 2/7/2018 10:50:35 AM
Are we going to test the lows again ?


John Perry on 2/7/2018 11:38:49 AM
Thanks for your reasonable commentary on the markets. Love your comments on your mood ring!
Any thoughts for a 65-y.o. to take a pension in monthly distributions (given its vulnerability to inflation and time value of money) vs. lump sum with the market in its current state?

T Marie on 2/7/2018 2:10:20 PM
 

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