Date: November 2, 2018

Stocks Peaking on Amazing Jobs Report

What a volatile, interesting and fun week it has been. I am about ready for some time to myself although I do board a flight on Sunday afternoon for a quick trip to Chicago. Deep dish pizza, here I come!

My plan coming in on Friday was to look for another big up day for the bulls and then begin to take some risk off the table, book profits or however you like to call reducing exposure to stocks. It appears as though part of the rally this week has been on hopes of a trade deal with China based on the president’s tweet. First, I don’t think that is happening anytime soon. Second, I do think it could happen once the next Congress is seated in January. Perhaps before Q2 2019 ends.

Critics of Trump have been tweeting that it’s all a ploy to juice stock prices ahead of the election in hopes of helping the GOP. While stock market performance is a good predictor of presidential elections, it has absolutely no correlation to mid-term elections. Long time readers know that my election model correctly predicted a Trump surprise, much to my disbelief. It hasn’t been wrong since 1992.

Earlier this morning, stocks retraced 50% of what they lost during the correction as you can see below on the Dow. That’s the first line of defense for the bears where you would expect them to put up a fight. The other major indices have not been as fortunate.

The October employment was absolutely stellar. 250,000 new jobs created. Unemployment at 3.7%. Annual wage growth hit 3% for the first time in 9 years. Even the habitually wrong Armgeddon, naysaying, gloom and doom crowd will have a tough time poking holes in this report. My only question is given how late we are in the cycle, is the economy peaking…



Paul Schatz, President, Heritage Capital