Can Flynn End the Bull Market?
One month to go in 2017. Lots and lots of underinvested people chasing returns now. What the heck do they do? Especially when pullbacks have been few and far between. We haven’t seen a 10% decline since February 2016. There have been no pullbacks of 5-10% at all since then. The biggest decline we have seen was in Q3/Q4 2016 and that was 4.63% in the S&P 500. Hardly what people have been waiting for to invest their cash and that was under Dow 18,000.
This morning, news broke that Michael Flynn pleaded guilty to lying to the FBI and is prepared to cooperate with the Mueller investigation. Immediately, stocks and the dollar plunged while bonds and gold rallied. As Mike Pence supporters are readying President Pence, the bears are hoping that this is the big one. The end of the “Trump Trade”. Phooey I say! The bull market isn’t over.
Seasonally, there is a soft patch from today through December 15. That means that historically, stocks have a headwind for the next two weeks, not that they have to plunge. Countering that is that stocks just closed the month at their highest level of the month. Historically, that has led to strong upside over the next week roughly 70% of the time.
Stocks have been uber strong for a long, long time. The Flynn news will increase volatility and give a little downside nudge to the market. However, tax reform will still pass. Corporate earnings are setting records. The economy is getting stronger quarter by quarter. Buy any and all weakness until proven otherwise. Donald Trump didn’t create the bull market or feed it. The credit goes to the GOP.
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