The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Late rollover
Overseas markets sold off some but S&P futures resisted the influence, only trading down 7-8 points in the premarket. They recovered into the open and the index itself opened about flat. The morning tendency for bullishness showed up on schedule and the S&P printed new all-time highs just before lunch. The yield curve flattened, with the back end coming in 1-5 bips, something that should’ve helped the bulls all day… but didn’t. After midday, the S&P drifted down to unch’d and went modestly negative in the final hour. Capital flow was about normal, 103%.
The morning’s ADP labor data (+41k vs +50k est & -29k prior revised from -32k) didn’t move markets. Despite it looking like a weak-labor surprise, markets barely jostled on the release. The existing narrative of the economy and the labor market remains as-is and investors went back to doing their usual, lifting prices. But then Trump said some things.
The most noteworthy Trump headline broke a little after 2 PM. He said he won’t allow defense companies to issue dividends or buy back their stock until the invest more in production and research. Here’s the intraday chart of an aerospace and defense ETF. Can you tell when the news broke? I’ll give you a hint, the market didn’t like that Trump pronouncement.
Anyway, Trump had many things to say this afternoon and they weren’t warmly received by the markets. While defense stocks don’t usually lead the market, today they were the lightning rod for negative sentiment. And once the chill started in defense stocks, it spread.
I don’t think this is a true investment landscape shift… but Trump just threw hit hat into the ring for forbidding and/or mandating capital actions out there in the market… that ain’t good for longs.
I think this just Trump being Trump. Breaking things with statements is his milieu.
Nut if these things go into effect, that would change the landscape. It’s not so much the direct effects of the specific things he wants *today.* It’s about what he wants *next.* It is well know what happens when you give someone an inch.
See you tomorrow.
-Mike
Visdom Market Commentary
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