Every now and then, the market gives you a look at what people are thinking. On Thursday, we got a great look. The S&P was down starting in the overnight session and into the morning as pundits tried to parse what the Trump press conference meant for markets. The headlines throughout the day mostly alluded to stocks being down from Trump under-delivering in the presser.
Now, to borrow a line from the wise Jim Cramer and Mad Money, this is Real Money, not Real Politics. We aren't here to discuss the rights and wrongs of the political situation, but rather to try and figure out how to make money from it. With that said, we need to listen to what Trump says and match that against how companies are reacting, because that is what will drive markets and that's what prudent financial analysis demands.
Having watched the press conference closely, my argument would be that Trump delivered a practical game plan that discussed all the major issues. In fact, my big takeaway and something that I think was reflected in the selloff in the dollar yesterday was that Trump is not looking for a vengeful trade war. He is, however, looking to act as a fiduciary for America Inc. and all of its shareholders, the American people. And acting as a fiduciary means avoiding situations like a trade war that could cause harm to the economy.
I think when we take what Trump says about creating jobs along with what we are hearing out of companies like Amazon (AMZN) , Yum! Brands (YUM) and others about actually creating jobs, we see that companies are taking Trump seriously. This means that we, as investors, need to take Trump seriously. Looking at the price action of what we saw on Thursday, it's clear that the market is taking Trump seriously. The market has either been making new highs, or trading just off of them for two months now. The inability of the market to sell off yesterday shows how strong the underlying bid is for stocks here. The fear of missing out is still very much alive and there are managers out there that have to be involved and that's what is driving this market.
Moving back to our bread and butter strategy of staying focused on the data, Thursday also gave us another low week of unemployment claims. The data is almost perfectly tracking last year's trend, but at an overall lower level. For example, initial claims for this week were 247,000 vs. 277,000 in 2016.
Couple this trend with what we are hearing out of actual companies and in surveys like the NFIB Small Business report regarding hiring plans, we are looking at a very strong job market for 2017. As we know, a strong job market drives strong consumption which in turn drives a strong economy and ultimately the market.So, the bottom line here is that we have to start assigning a greater probability of Trump being successful than not, because companies and people are falling in line with his plans. Hey, everyone working is a good thing. When the American economy is firing on all cylinders, it takes the world with it. We've seen this movie before, and it does have a happy ending.