Sometimes the market rallies because bad things don't happen. Other times it rallies because fears prove false. When the markets collide with negative news they tend to go down, but with this market collision avoidance is king, and when we collide we bounce back with alacrity.
Let me give you some concrete examples of what could have happened that didn't, the accidents that never occurred.
First, let's parse some of the biggest fears being peddled by pessimistic prognosticators perhaps designed to sow panic, panic that didn't happen.
How often, for example, did we hear that if the Dow didn't crack 20,000 we were doomed for a huge selloff. I can't believe how loud this chatter was. It was almost as if the issue was binary: We crack through the 20,000 ceiling or we get thrown back into some sort of oblivion.
Well, here we are: We didn't take it out; we got thrown back from the Dow 20,000 ramparts and the result? The Dow stocks get right off the canvas and make another challenge. This prognostication was just plain wrong.
Second, we heard that there would be big rebalances at yearend that would require institutions to sell a great deal of stock, and we also thought that there would be a gigantic wave of tax-related selling when the year began by people who wanted to hold out for lower rates that could come from a Trump administration.
Sure, we got a little selloff last week, but it wasn't monumental at all. The rebalancing was a canard. Tax-related selling? It hasn't happened. It looks like individuals either aren't much of a factor in the stock market - entirely possible - or that the average investor wants to play this one out ... wants to see how high we can go. Who can blame them? Each selloff has been met with buyers. Why not let things run?
Then we had as astonishing amount of talk about how we are seeing peak cycles in everything from homes to planes to cars.
So far, despite the dramatic spike in rates, we have not heard from any homebuilders about a slowdown. If anything it's the opposite. There's a housing shortage. I keep reading these scare articles about the collapse of high-end apartment values. Oh, come on, housing is a multiple-trillion-dollar market and yet the media just babbles on about $5 million apartments in New York. We are seeing a resurgence in homebuilding. It's finally back to where it was before the Great Recession. So much for peak housing in a world of higher rates.
Peak planes? This has been one of the biggest canards out there. Yes, it is true that this incredibly important business is being stung from a surfeit of large-body airplanes. But the small-body planes? You just can't get them. There are queues stretching for years. And there's a good reason: As the world becomes more middle-class, travel grows. It's a secular not a cyclical trend.
Today we learned that the biggest scare story of all, peak autos, was just plain wrong. We saw flabbergasting numbers out of General Motors (GM) today, plus 10 when analysts were looking at plus four. Every single auto company reported better-than-expected numbers and in some cases, like Ford (F) , the incredibly lucrative F-series trucks led the way.
The impact here is huge. Not only do car sales impact these companies' stocks, but they are fabulous for CarMax (KMX) , AutoNation (AN) and for car-part companies like Lear (LEA) and BorgWarner (BWA) that have been endlessly downgraded by non-believers. I think that auto sales are strong because you need a car to go to your job and jobs are plentiful. The conclusion of the tense, mud-slinging election busted open the floodgates of buyers, and December was just plain off-the-charts fantastic. Tesla's (TSLA) stock even rallied despite missing (barely) its forecast, helped no doubt by the larger back-drop and an analyst meeting where Eli Musk worked his usual magic.
A little more than a month ago we were aghast that the president-elect was tweeting attacks on individual companies about moving jobs to Mexico. The first foray? An attack on United Technologies (UTX) that caused the company to blink and lay off 1,000 workers instead of 2,000 that would have been let go in order for Carrier to manufacture heating equipment in Mexico, something that would cost the company a couple of pennies per share.
The stock was at $108 at the time that UTX caved. It's at $110 and change. Buying opportunity.
Next? Boeing (BA) , attacked by a tweet over outrageous Air Force One overruns. The stock was at $154. Now it is at $158. Buying opportunity.
Then Lockheed Martin (LMT) got hit over the head with a two-by-four for F-35 overruns. Don't look now, but the stock is now than when that tweet appeared. Buying opportunity.
Oh, and what a chance you got to buy GM yesterday off of a tweet about it making cars in Mexico and shipping them here. I saw the stock hit $34 and change in the pre-market. Sure we got good superseding news, but let's face it, when was the last time you made almost three bucks on GM in 24 hours. Buying opportunity.
Lots of skeptics have asked me over and over again, What does de-regulation really mean? How can the president really roll back regulations? By appointments, that's how. You think that a Greg Pruitt, an Oklahoma attorney general, can't roll back years of regulation by the EPA if he's approved for the job? Hate it or love it, he'll have a field day and it will be incredibly good for the earnings of utilities and fossil fuel companies and refiners and pipeline companies. You think that Andy Puzder, CEO of fast-food company CKE Restaurants, and someone who has worked hard to make his chain profitable will represent labor's interests? Only theoretically in that he believes that if you raise minimum wages then jobs get lost. You think that this new SEC appointee, Jay Clayton, a corporate finance lawyer from Sullivan & Cromwell, will be creating a bunch of new regulations? Think again. This is a job that's gone to prosecutors or regulators of late, including the current chief, Mary Jo White, who had been a fierce prosecutor before she got this job. Clayton's a deal marker. He's going to look for ways to help business, not hurt it. You think Rex Tillerson, late of Exxon Mobil (XOM) won't promote the interests of business and make it easier for them to do so, especially the oil companies? Anything's possible, but that's unlikely.
Then there's the recovery of stocks that had been blasted for not being cyclical enough to participate in the rally. We are seeing large buyers of Salesforce.com (CRM) , of Facebook (FB) , even Red Hat (RHT) , which just missed its quarter. At the same time some stocks that had been left for dead, the rails, the ag companies - have you seen those breakouts in Deere (DE) and Disney (DIS) , both of which had been challenged by recent numbers?
Finally, there are the European collapses that haven't collapsed. Remember when we were worried about Brexit and its impact on British banks? How about when we thought Deutsche Bank (DB) could be put out of business by the Justice Department? How about how hobbled Credit Suisse (CS) is? Guess what, they have all rallied huge. The debacle didn't happen.
Collision avoidance. Rapid Recovery. The hallmarks of this rally just don't stop. They are behind the hidden strength of this amazing bull market.
