You'd better get one super-strong level of conviction right now if you are going to continue riding the Trump rally. We are at a moment where there are so many crosscurrents, many caused by the president-elect himself, that you need a cast-iron stomach to get from here to Friday's inauguration.
This one session demonstrates the need to believe in what you own while accepting that at any minute a tweeted lightning bolt may be directed at your head.
Let me tick down the impact of off-the-cuff comments and statements and how they could and are impacting stocks you might own of companies that have a terrific story behind them.
Let's start with Constellation Brands (STZ) , the maker of Modelo and Corona, the fastest-growing portion of the entire beer market. This stock's been on a sickening slide ever since the big Trump upset, and not just because it's got something to do with Mexico, which invokes horror every time the wall is mentioned.
No, Constellation's been hammered because of something the tax code rewriters in Congress have been trying to get done called a cross-border tax, where if you import goods made overseas you have some pretty miserable tax implications, but if you export you don't have to pay taxes on profits. Theoretically, this is a terrific idea if you are trying to bring back manufacturing in this country because you get a real good deal if you make it here and sell it there and a real crummy deal if you make it there and sell it here.
So, take Constellation. Because Corona and Modelo are Mexican beers, it's not possible to make them in Milwaukee or the Rockies. Therefore, it could be hammered by the cross-border tax, something that's just too nutty to comprehend as Rob Sands, the CEO of Constellation, told Mad Money not long ago.
Well, it turns out to be too nutty for President-elect Trump, too, who, in an interview with The Wall Street Journal, called it too complicated.
Now that's got Constellation going, rallying three points, because the idea is if Trump says it's too complicated, then it's too complicated and it isn't going to happen.
The real battleground here is in retail. Retailers buy so few goods here and so many overseas that it's natural to presume their stocks should get a gigantic discount over all other stocks. That's what's been happening and it's been nasty. Until today, when there's been an incredible reversal. Take the best of the best, PVH (PVH) , which makes Hilfiger and Calvin Klein overseas and sells them here. Even as this company reported a terrific quarter, as we know because CEO Manny Chirico told us on our show, but he's also said good things subsequently about business. All that's happened, though, is the stock's been hammered.
Until today when the stock's up six.
It's the best example of what's happening in the entire group. If you bolted into the negativity, you ran right into a more positive Trump.
It's not just retail that wins, though. Think about Apple (AAPL) . It manufactures here but the vast bulk of phones are made overseas. It could be a big loser if it doesn't bring manufacturing home, something Trump mentioned repeatedly when he was stumping. Today, though, even as Morgan Stanley (MS) trimmed near-term numbers, the stock's breaking out. All last week, on the 10th anniversary of the iPhone, I kept hearing that the best days of Apple are behind it.
That's fine. I say own the stock, not trade it. If you traded out of it on all that downbeat talk, it's starting to pull away from where you exited. When will people learn?
But there's another issue here that's rippling through the market. If the president-elect disagrees with his own party on this issue, will that derail the tripod -- the lower corporate taxes, repatriation of foreign profits and deregulation -- that has helped power us higher since the election?
If that's the case, then the economy won't be as strong as some expect. If that's the case, then you aren't going to see interest rates go higher. There won't be that much demand for money. Conclusion? The bank rally, which had been bolstered by the fantastic numbers last week from Bank of America (BAC) , Wells Fargo (WFC) and JPMorgan (JPM) , may be on its last legs. So even though Morgan Stanley reported a gigantic beat, even though anyone who devoured the conference calls of these companies knows things have gotten much better in the last quarter, especially in the last month, these stocks are getting bashed. They can't go up if rates go down. (Apple and Wells Fargo are part of TheStreet's Action Alerts PLUS portfolio.)
So the impact of a rift with the Republican Party suggests we aren't going to get the growth that drives rates higher, including that of the Federal Reserve, the fuel is gone.
I don't believe it. I think the president-elect can't help it. He likes to deal. He puts out points and then he negotiates. It is very hard to believe he won't get his way eventually, and I think rates should be higher, not lower, and will go there.
My conclusion? This is the selloff that makes the stocks of the banks more attractive, not less. Remember, Goldman Sachs GS reports tomorrow, and it has a history of trading down no matter how great the numbers, and some of that is from the window for partners to sell flying open after the quarter. Given the monster 40% run in the stock recently, could partners be so greedy as not to sell?
So keep your powder dry. Wait two days before you do any buying into this dip. Oh, and to be sure, yes, Morgan Stanley's quarter was outrageously great, as were those of Bank of America, JPMorgan Chase and, yes, Wells Fargo.
Then the president-elect comes out and says the dollar's gotten too high. Wow, no president ever comments on the dollar. But Trump's a business person who will be president and he doesn't understand a lot of what he's not supposed to do. If the dollar's weaker, then it helps our exports. But I think more important, when the dollar's weaker, oil goes higher.
Now, you've got a second set of variables. Yesterday Noble Energy (NBL) agreed to buy Clayton Williams (CWEI) , an oil company with fabulous acreage in the Permian, for $2.6 billion. At the same time today, Exxon Mobil (XOM) paid the Bass family $6.6 billion for enough Permian acreage to double the size of its holdings in that area, where oil can cost as little as the teens to take out of the ground but certainly can make a good profit anywhere in the $50s where oil is now.
It's tough, I know, but I am urging you to stay long oil and gas because on Friday we will have the most pro-fossil-fuel president in history. Don't be whipsawed. I know, easier said than done, but find something you like that's oil and gas and stick with it.
And how about drugs and health care, all weak today? I liked United Health (UNH) , terrific number and it almost always sells down on a terrific number. It's a buy; but the drug stocks? They feel very tweetish here, meaning that they might be on the verge of another tweet calling for rollbacks to 2014 pricing or something that shatters the calm in that group. Just be ready.
So let's understand that if Trump talks at odds with Congress, it's not the end of the program. He hasn't even been sworn in yet. But some things, like the love affair with fossil fuels, is more likely to intensify and any weakness, especially with a dollar-bashing president, says you gotta love that sector.