November 7, 2016

After the FBI abruptly signaled an end to its investigation of Hillary Clinton, the stock market reacted by gapping up at the open. The Dow and SPX are currently up 305 pts & 1.9%, respectively. For the moment, this seems to put an end to the recent 5% correction in the SPX. All eleven sectors are in the green, led by the most beaten-down sectors: healthcare and financials. The VIX Index is back down under 19 and investors seem pleased that a Clinton win appears likely. European markets are poised to close about 1.5% higher and Asia was up overnight. The dollar is significantly stronger on the day, and yet most commodities are also higher. WTI crude oil is up modestly to $44.30/barrel. Iron ore and copper are up 2-3% in early trading; that should tell you China is doing better. Bonds are selling off as yields head higher. The 5- and 10-year Treasury yields are trading at 1.28% and 1.82%, respectively. 

I mentioned the S&P 500 Index fell 5% from mid-August through Friday. Part of that was due to a retrenchment in oil, from $51 to $44. And while corporate earnings announcements have been better lately, CEOs on balance don’t seem very optimistic about the future. In addition, we’ve had political uncertainty with very tight election polls and of course the re-opening of the FBI investigation of Ms. Clinton. The FBI has been under heavy pressure to announce a conclusion to that. On Friday, FBI Director Comey sent a letter to congress saying the bureau has “not changed its conclusions” about Clinton’s culpability. In other words, the FBI doesn’t recommend prosecution.   

We had a moment Friday when the “trader” mentality of CNBC was challenged in a way it rarely is. Portfolio manager and CNBC contributor Josh Brown addressed the issue of trying to time the market in order to avoid a small market correction should Donald Trump win the election. He said, “If they’re concerned with 3-5%, they have to understand they will never make money with that attitude.” TIAA-CREF portfolio manager Stephanie Link agreed. “I don’t think you can time [the market]. I do this for a living every single day, and it’s impossible to time.” 

 

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