View From the Hill: 5 Fundamental Perceptions Raising Trump’s Market Reality Ratings

Posted on Posted in Views From The Hill

By J Clinton Hill, Capital Markets Strategist @ Hillbent.com

ETF Market Commentary

View from the Hill, stocks, bonds, cash, commodities, real estate, volatilityWith exception to the Nasdaq-100 (QQQ), the Dow-30 Industrials (DIA), SP-500 (SPY) and Russell-2000 (IWM) continue to make new highs. Unlike most of the international markets, US stocks are trending upward and displaying remarkable relative strength. I am still of the opinion that the market is severely overbought and have recently started selling into its strength. If you are of like mind, “define your stops for risk management purposes or hedge appropriately”, thus says Justin Case.  😉

Nevertheless, the saying often goes that perception is reality, so let’s take a quick look at what fundamental perceptions currently exist and are driving this market. Here are five of them:

  1. The unexpected election of Donald Trump has created much anticipation of pro-business policies, e.g. tax cuts and government spending on infrastructure and other fiscal stimulus actions.
  2. 3Q-2016 earnings for the SP-500 have been extremely positive as more than 3/4 of the 477 companies have exceeded estimates. These positive surprises combined with the expected reversal in negative earnings growth in 4Q-2016 are also making for a very potent cocktail.
  3. Strong Existing Home Sales are supporting residential Real Estate, which is closely tied to consumer activity, another important pillar in the US economy.
  4. The biggest earnings rebounds are projected in the Energy and Financial sectors. The stabilization in oil prices and anticipated rate increase by the Federal Reserve respectively bode well for both groups.
  5. Lastly, the stronger US Dollar has and is making equity assets a relatively attractive option for capital.

As I said yesterday, shorting this market will not leave one one unscathed. Let’s see if the bulls can get over the hump on Wednesday. 9 out of the last 12 trading sessions have been positive for the SPY, while the IWM has advanced 13 consecutive sessions for a +17.9% gain. Trees do not grow to the sky without pruning. Be mindfully careful. Signing off @ Hillbent…

(Please refer to ETF summary table below for performance analysis .)

 


ETF Performance Summary

 

RS 1Yr Exchange Traded Fund Last Chg % Chg
  Equities
99 DJ-30 Industrials (DIA) 190.02 0.68 0.36%
99 SP-500 (SPY) 220.58 0.43 0.20%
97 Nasdaq-100 (QQQ) 118.90 0.36 0.30%
100 Russell-2k (IWM) 132.80 1.20 0.91%
57 EAFE (EFA) 56.82 0.14 0.25%
73 Emerging Mkts (EEM) 35.46 0.53 1.52%
36 Europe FTSE (VGK) 46.03 0.04 0.09%
75 Latin America 40 (ILF) 28.22 0.25 0.89%
80 Brazil (EWZ) 34.17 0.42 1.24%
6 Japan (EWJ) 49.91 0.12 0.24%
82 Pacific Ex-Japan (EPP) 40.83 0.37 0.91%
79 FTSE China 25 (FXI) 36.88 0.64 1.77%
23 VIX Short-Term Futures (VXX) 27.91 0.13 0.47%
   
  Major Equity Sectors
100 Consumer Discretionary (XLY) 82.70 0.97 1.19%
43 Consumer Staples (XLP) 51.10 0.26 0.51%
98 Energy (XLE) 72.78 -0.04 -0.05%
56 Financials (XLF) 22.25 0.01 0.04%
47 Healthcare (XLV) 68.94 -1.01 -1.44%
100 Industrials (XLI) 61.91 0.28 0.45%
97 Materials (XLB) 49.19 0.30 0.61%
28 Real Estate (XLRE) 30.14 0.51 1.72%
99 Technology / Info (VGT) 121.73 0.16 0.13%
73 Telecom (IYZ) 32.19 0.42 1.32%
47 Utilities (XLU) 46.96 0.18 0.38%
   
  Bonds & Fixed Income
9 20+ Yr Treasury (TLT) 121.11 -0.04 -0.03%
17 Aggregate Bond Fund (AGG) 108.56 0.10 0.09%
55 Treasury Inflation Protection (TIP) 113.69 0.10 0.09%
37 Investop Corp Bond (LQD) 117.01 0.30 0.26%
87 High Yield Corp Bond (HYG) 85.94 0.63 0.74%
4 Pimco Intermed Muni Bonds (MUNI) 52.67 -0.10 -0.19%
4 High Yield Muni (HYD) 29.42 -0.31 -1.04%
   
  Currencies
95 US Dollar Bullish (UUP) 26.13 0.04 0.15%
5 Euro Trust (FXE) 103.26 -0.04 -0.04%
46 Japanese Yen Trust (FXY) 86.86 -0.02 -0.02%
   
  Commodities
86 DB Commodity Index (DBC) 15.06 -0.02 -0.13%
50 Gold (GLD) 115.54 -0.04 -0.03%
51 US Oil (USO) 10.63 -0.14 -1.30%
   
  Real Estate
46 DJ Real Estate (IYR) 74.95 1.26 1.71%
72 DJ Home Construction (ITB) 27.62 0.03 0.11%
27 Residential Real Estate Index (REZ) 59.09 1.00 1.72%

 

Signing off @ Hillbent…

 

(For more a more detailed and extensive coverage of ETFs, please refer to our premium research service, ETF LookOut Points.)

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