Date: November 28, 2017

Bulls Remain In Charge

Stocks came back from the semi-holiday weekend in good spirits, at least for the morning. There was no follow through though as a post-Thanksgiving hangover is usually the theme for the first day or two of the new week.  We still have a variety of crosscurrents over the very, very short-term, but looking out one to three months, the picture is positive.

As you know, it’s very difficult to see an end of year decline, especially when the year has been up. Additionally, December is usually an up month when it begins in an uptrend as defined by price being higher than the average price of the past 200 days. Remember, mutual funds typically close their books their books at the end of October and often square up gains and losses. Additionally, in an up year investors will often wait to take gains until the new year to forestall paying capital gains. Finally, companies rarely warn regarding earnings in December. It would really take an exogenous event to cause a meaningful decline next month.

Given all that, the ongoing theme remains to buy any and all weakness until proven otherwise. In “normal” years, stocks will see a very mild pullback early in December where small caps become the leader to year-end and into January. 2017 has certainly not been a “normal” year as volatility as been essentially nil.

On a separate and final note, Jay Powell’s Senate confirmation hearing to succeed Janet Yellen as Fed chair is today. I would be absolutely shocked if Powell made any unexpected comments that impacted stocks. It should be very ho hum.

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Paul Schatz, President, Heritage Capital