Lack of overhead resistance. I attribute a lot of these gains we have to a lack of sellers as we go higher because many of these stocks haven't been this high and don't have a lot of flippers in them.
When you look at the stocks that have led us higher -- Goldman Sachs (GS) , JPMorgan (JPM) , Travelers (TRV) , United Health (UNH) , Walt Disney (DIS) , American Express (AXP) , Verizon (VZ) , Boeing (BA) , Caterpillar (CAT) and Chevron (CVX) , all up more than 10% -- you come up with stocks where there just aren't a lot of profit-takers.
Put it this way: If you own American Express, you are in it for the long haul and this rally doesn't really get you thinking, "Now is the time to get out." It's not expensive.
Travelers? This company is such a beneficiary of higher rates and it has so few momentum owners, you can only imagine how high it can go before people who bought it at, say, $115 want to flip.
United Health is simply a horse and it has become the de-facto health care company in a world where there are a gazillion health care companies but many regarded as not-Trump stocks. It's a rarity, a health care cost controller that's not trying to merge and isn't part of the Affordable Care Act. It also has a big data division that hasn't been factored into its valuation.
Boeing literally has been marking time for the last three years as the whole thesis of the Dreamliner had to play out and it turns out to not be the big story. It's the change from large-body to small-body planes and the margin compression from the switch that has hurt the company's stock. But that's in the past and we are starting to see the gigantic cash conversion that comes from selling these planes for a hefty profit. It's incredible how much stock the company can buy back: $14 billion in capital to retire the stock of a $97 billion company plus a 30% dividend boost. That's the kind of thing that makes you want to hang on, not sell.
Then you have Walt Disney, which has been hammered endlessly by ESPN weakness. The spur here is that we all know it. But how about all the movie good news and the theme-park good news and the lower taxes and the repatriation? All could trump ESPN's weakness. (Disney is part of TheStreet's Trifecta Stocks portfolio.)
You want to sell Verizon when it yields 4% and has a growth story associated with it? I sure don't.
I could make the same case for Chevron, a 3.6% yielder that is a huge winner as oil creeps higher, which is exactly what it is doing.
Caterpillar? You believe in the $500 billion infrastructure plan? Tell me that isn't music to the ears of CAT, especially if Trump insists that in order to Make America Great Again, the road builders have to buy American.
Which leads me to Goldman Sachs and JPMorgan, the real leaders of this rally. These stocks are so far behind the market that even though they have advanced endlessly, they just aren't that expensive if we get deregulation. How did Goldman Sachs' stock sink to around book value, where the company could close its doors and still make money? Simple: Regulation took away the company's edge to be creative with its own money. That could come back if Dodd-Frank gets shelved. Or at least the portions relevant to Goldman Sachs.
And JPMorgan? Here's the world's finest lender and it sells at 14x earnings before we get the Trump goodies. It can raise its dividend gigantically and that will bring in lots of buyers. It can put its capital to work lending in a way that we haven't ever seen because it became a national bank during the Great Recession, but we have really just started seeing the benefits.
That's right, what's going on here with JPM is open-field running.
Which is why it can go still higher than it has already and simply is a buy, not a sell, especially if we get three rate hikes. We get that you are talking about as much as $3 billion in additional earnings power.
You want to sell knowing that's ahead? Be my guest. There will be institutions that will take down every share.