Post-election, the Dow has made its way into all-time high territory. It was an amazing run for the market since last Tuesday. Financial expert Marty Mazzora says he was surprised.
Marty says, “The consensus, and the trend in trading for the past several months, had it that if Trump were to win, the market — at least initially — would hate it.
And, actually, initially– as in futures trading as the results rolled in in his favor last Tuesday night — global markets hemorrhaged. But after his acceptance speech where he emphasized, in particular, infrastructure spending, those who were betting big on a decline decided they had to cover those bets or possibly lose big time if the market turned positive.
The actual covering of those positions — along with sentiment going from extremely bearish to somewhat bullish literally overnight — led to an impressive rally in the Dow.”
When asked about the outlook for interest rates since the election, Marty says,
“Well, if you look at how bonds have traded and the impact that that’s having on lending rates, clearly, the market is discounting a higher trajectory for rates than it was pre-election.
In terms of the Fed: Prior to the election there was an 85% probability of a December rate increase discounted in Fed funds futures trading. As of yesterday, it’s 92%…
That’s another surprise, given how the election turned out. The consensus had it that if Trump wins, there’d be so much uncertainty that there’s no way the Fed would move in December.
But the fact that Republicans control both houses as well, suddenly makes things like corporate tax and regulatory reform, as well as a serious push on infrastructure, highly doable; which could the economy into the typical latter — and somewhat inflationary — stages of the recovery.
I will say that for the market to maintain its upward trend, Trump will have to really walk back his rhetoric on trade. Which has seen many non-US markets considerably lower since the election.”
Marty also talked about corporate earnings.
He said ” Actually, third quarter earnings reports are wrapping up quite positively. In terms of the S&P 500, 76% beat analysts’ estimates, and we’re going to finish with real earnings growth for the first time in several quarters, despite continued weakness in the energy sector.
All in all, the setup — at least for today — looks decent going forward…”