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  1. Home
  2. / Investing

Where Is the Positive Commentary on Trade Deals?

This lack of celebration over good trade news creates a 'climbing a wall of worry' dynamic.
By JAMES "REV SHARK" DEPORRE
Aug 28, 2018 | 08:02 AM EDT
Stocks quotes in this article: JPM, GS

The indices produced some classic upside follow-through on Monday after breaking out to new highs on Friday. There has been some concern about the light volume that is driving the action but it didn't slow down the buying.

What was most notable on Monday was that traditional leadership was back. The FAANG and big cap technology stocks led to the upside and they had some healthy assistance from financials in the form of JP Morgan (JPM) and Goldman Sachs (GS) . Breadth was solid but small caps did lag.

This is standard bull market action and is particular impressive as it comes during the slowest time of the year seasonally. August and September have long been the weakest months of the year but you wouldn't know if from the action we have been seeing recently.

The most interesting dynamic at work in the market right now is how positive trade news doesn't seem to be discounted. The deal that President Trump announced with Mexico yesterday has been anticipated but the market acted like it was surprised by the news.

For a number of reasons, the market doesn't seem to want to anticipate positive outcomes to the trade disagreements. For months it has been focused on the negative ramifications of trade wars and we have heard almost nothing about the possibility of positive outcomes. Good news never seems to be fully discounted and that is what is keeping a bid under the market.

Much of Wall Street appears to have an anti-Trump bias which prevents it from fully embracing positive economic news. There is a large faction that keeps anticipating Trumpian disaster of some sort and they simply refuse to acknowledge that things like renegotiating NAFTA might action be positive. There is almost no positive commentary to be found about these trade deals which is stunning given how the market is reacting to them.

This lack of celebration over good trade news creates a 'climbing a wall of worry' dynamic. Market players keep looking for the uptrend to end but when it doesn't they are forced to put money to work and that keeps the rally going. While the indices are hitting new all-time highs, sentiment continues to be quite sedate. The mood is nothing like the euphoria we have seen at other times when the market was at all-time highs. As recently as this past January the market was quite frothy before the blow-up of the short volatility trade.

It is a peculiar market environment and it driven in large part by strong emotional reaction to a very unusual President. How can this man produce such positive forces in the market when he is so lacking in certain diplomatic traits? It is a mystery to many and they can't stop themselves from forecasting a disaster.

My game plan is to continue to ignore the pundits that are looking for political issues and to stay focused on what can go right unti the price action shifts. Sticking with the trend and picking individual stocks is what is working.

The pundits don't seem to appreciate the positive aspects of the trade deals and that is best fuel for keeping this market running to the upside.

(JP Morgan and Goldman Sachs are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JPM or GS? Learn more now.)

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At the time of publication, James DePorre had no position in the securities mentioned.

TAGS: Economy | Investing | Politics

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