Anxiety Over Taxes
December 15, 2017
While the market has continued to hit new highs this week, the underlying internals have been shaky as we’ve seen more decliners than advancers on the NASDAQ as profit keeps rotating out of tech. We’ve also seen more losers than winners on the NYSE.
Normally, deteriorating internals – when you have more decliners than advancers – and an increasing number of stocks hitting new lows would be a red flag. However, there was additional action that actually gave me confidence. Investors bolted out of the safe haven of utility stocks and into financials ahead of Wednesday’s interest rate hike.
This move bodes well for the overall economy, as well as the possibility of banks actually starting to lend money again. And it’s always a breath of fresh air to see new leadership.
Now it’s just a matter of the GOP getting its act together, as tax reform will have an overwhelmingly net positive impact on the economy. I think the action in the Russell 2000 underscores the fact that the bill is more beneficial to multinational companies than domestic businesses.
The market wants and needs to see tax reform finished and put into the can. There is a greater sense of urgency following Alabama’s election of Democrat Doug Jones to the Senate.
The problem right now is that there is a lot of anxiety over the GOP’s bill, and it’s turned into a nail biter with several Republican senators voicing concerns. Still, it was looking like a done deal until Senator Marco Rubio threw a wrench into things yesterday when he declared his nonsupport unless there was more money carved out for childcare.
Word is leaking of a compromise with Rubio, which has allowed stocks to bounce this morning. Be that as it may, the market has exhibited some vulnerable signs, although I do like that there hasn’t been panic. I’m not looking to chase the opening gap, but I am ready to add positions during any tumult.
In the end, it’s been a great year for the market and I like how things are positioned as we wrap up 2017 and look ahead to 2018. I have fresh ideas high on my list right now, and I look forward to building on our success in the New Year.