State of the Stock Market Analysis for the Week Ending March 26th, 2017 (Stock Market Took Tough Week In Stride 3-26-17)
It was difficult week on Wall Street, and we could probably blame the “Mad Hatters” in Washington DC. Tuesday’s big selloff was a one-day event, and it came with the backdrop of all sorts of political intrigue. The many cross currents have left most of us scratching our heads, and even the most seasoned political strategists are unable to explain clearly, just what is going on in DC. Russians, wire taps, and the upcoming vote on the debt ceiling had investors guessing as to what this big mess means. But, the kicker was the defeat of the healthcare “reform” bill on Friday. The stock market took it all in stride, though, and for the week, we saw just modest losses of 1.5% for the Dow, 1.2% for the Nasdaq and 1.3% for the S&P 500.
The health care vote was an absolute mess, and Democrats cheered its “no go” on Friday, and in some ways, it does look like a big failure for President Trump and Republicans. When we look more closely, though, there are a lot of Americans that have seen health care premiums soar over the past couple of years, and a lot of voters are not too happy with the state of health care and insurance right now. Trump has already admitted that the health care system is a lot more complicated than he ever thought, so in some ways, the defeat of “changes” in Congress might actually benefit Trump in the long run.
Trump can say that he and the Republicans attempted to make a change, but failed, and whatever problems remain were and are already in place. Some Republican strategists are already saying that this “loss’ could ultimately become a “win.’ The main problem for investors and the stock market is that all of the hullabaloo over health care reform took A LOT of time and energy away from Trumps promises for tax cuts, deregulation, and infrastructure spending. We also have to keep in mind that Trump does not vote on these new policies. Congress crafts, debates and votes on these big issues and we seem to have the same old divided Congress and even big divisions within both parties.
Trump has only been President for a little over two months, and for all of the vitriol pointed toward him, a lot of the madness in DC can be attributed to Congress. There were some stock market strategists that said a “no vote” on healthcare reform would send the stock market into a nosedive, but we did not see that this week. This is a very positive sign for the stock market as we head toward summer. The stock market has historically done well with a divided government, and there is no doubt that we will continue to see multiple divisions for the foreseeable future in Washington DC. Oddly enough, this could be bullish for stocks for the rest of the year.
Politics aside, the “real” economy is still doing well. New and existing home sales remain strong, consumer confidence is holding up well, and the employment picture is still encouraging. On Tuesday we get the Case-Shiller home price numbers for January, and we will see if the year-over-year number tops December’s 5.8%. We will also see March consumer confidence, and economists are looking for a 113.5 reading versus the previous 114.8, so it will be a plus if we can see consumer sentiment top those expectations. Having the stock market still hovering near all-time highs should be helping sentiment numbers right now, so we will see what happens with that number on Tuesday.
On Thursday, we get another revision in fourth quarter GDP, and economists are looking for an upward tick to 2.0% versus the previous 1.9%. This is one of the “oddball” numbers that has investors and strategists frustrated. The weak GDP numbers are sort of like “the elephant in the room” that everyone pretends not to notice. The post-election rally that took the major indices to all-time highs earlier this month needs affirmation and confirmation, and that same rally is getting a “thumbs up” from everything but these lackluster GDP numbers. We will be watching this GDP number closely, so let’s hope we can see that report top the 2.0% level.
That said, the Gorilla wishes each and all a wonderful spring weekend! The NCAA basketball tournament has been loaded with upsets and fantastic games. We are down to the “Elite Eight,” and may the best teams win. It is getting exhausting to hear those great hoop announcers scream “unbelievable!” at the end of many of the games, but that is what happens in this spirited tournament. Again, have a great weekend, and we will be back in action on Monday!
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