The surprising rally post-elections continued this week and a lot of people are calling it the Trump rally. My take is different, and I think the markets would have rallied nonetheless given the most important fact, which was the elections were done. Yes, maybe the sectors might have been different were Hillary Clinton the madam president-elect, but the rally would have happened nonetheless.
We are also almost completely done with earnings season for the third quarter (94% of the companies in the S&P 500 have reported) and are now in the middle of the holiday quarter. By and large, the earnings came in better than expected, and I anticipate that trend to continue in the December quarter, at least in the sector that I am in, which is technology.
On the all-important Fed front, just yesterday we had two Fed heads stump for a rate hike next month. James Bullard, president of the St. Louis Fed said at a panel discussion in Frankfurt he is leaning towards a rate hike in December. He added that markets globally have had time to prepare, and he was still unsure about whether inflation will come ripping back but that the Fed is on watch for potential bubbles like we had in the 1990s (internet) and mid-2000s (real estate). On the political front he said he thought Trump's infrastructure improvement plans could boost productivity. Finally, he said inflation would have to be above target to speed up the pace of interest rate hikes.
Then we had Robert Kaplan, the Dallas Fed boss, also say that he is ready to remove accommodation in the near future and hinted that the Dec. 14 meeting was the likely time to raise rates. He said that the FOMC is watching Trump's economic plans closely and that the committee will factor that in its decision making. Finally, Kaplan said that a recession is not in his forecast.
In direct contrast, Mario Draghi, the European Central Bank boss, said the ECB will more than likely extend its 1.7-trillion-euro-bond purchase in December. He said the euro zone's tepid economy warrants continued central bank largess. "We cannot yet drop our guard," he said at the European Banking Congress in Frankfurt. "The ECB will continue to act, as warranted, by using all the instruments available" until inflation picks up sustainably.
What a muddled global economic picture we have across the world with most countries in easing mode, our central bank hot to trot on a rate hike, while the hapless Mexican central bank was forced to raise rates by 50 basis points to try to combat a plummeting peso vs. the greenback, thanks to the tough talk from President-elect Trump in the election campaign.
Speaking of the president-elect, Donald Trump will be a busy beaver this weekend with all sorts of chatter about appointments to his economic advisory team and other key appointments. The speculation is that the Treasury secretary job will go to ex-Goldman Sachs alum Steve Mnunchin, while Wilbur Ross will get the Commerce secretary appointment. Rep. Mike Pompeo, R-Kan., has been pipped for the director of the CIA position while retired Lt. Gen. Michael Flynn could be the next national security adviser.
Next week in techland earnings, we have Palo Alto Networks (PANW) and Vipshop (VIPS) after the closing bell on Monday, Analog Devices (ADI) and Tech Data (TECD) before the open and Hewlett Packard Enterprise (HP) and Nimble Storage (NMBL) after the close, all on Tuesday. The rest of the week will be sans earnings, at least in techland.
Rest up before the approaching holiday-shortened week and Go Cowboys!
On a lighter note, a mathematician, an accountant and an economist apply for the same job.
The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."
Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four -- give or take 10 percent, but on average, four."
Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says "What do you want it to equal?"
With that, I wish each and every one of you a safe and joyful weekend with your loved ones.
