State of the Stock Market Analysis for the Week Ending on November 5, 2017 (Week Ends with All 3 Major Indices at All Time Highs 11-5-17)All You Need Is Jobs

It was quite a week on Wall Street as all three of the major indices hit all-time highs against the backdrop of strong earnings and solid economic news. Apple (AAPL) set the tone with strong earnings numbers and the release of the iPhone X, which sent Apple stock to an all-time high. With the help of Apple, the major indices notched weekly gains of 0.5% for the Dow, 0.9% for the Nasdaq and 0.3% for the S&P 500. For the year, the tech-heavy Nasdaq is up 26%, the S&P 500 is up 16%, and the Dow is up 19%.

What had investors in a good mood on Friday was the government jobs report that showed 261,000 new non-farm jobs. Estimates were for 325,000 new jobs, but the 261,000 was still a decent enough number to keep investors in a relatively good mood. The unemployment rate dropped to 4.1% from the previous month’s 4.2%, and the 4.1% level marked the lowest level for unemployment since the year 2000. This was an impressive feat for the employment market, and it has many strategists saying that the economy shows few signs of slowing down.

All week long we saw positive economic news in terms of home prices, manufacturing, and consumer confidence, which helped the major indices move toward new highs. Many strategists continue to say that the slow and steady rise to higher highs is extremely healthy for the long-term prospect of this nearly nine-year-old bull market. The “irrational exuberance” that Alan Greenspan described in the late-1990s is simply not there. We do not have a red-hot IPO market, and we also do not have upside madness taking place at all.

The rally this year has been broad-based and deep, and that is a plus. There are clearly pockets of weakness, though, as we have seen in the retail sector and energy-related companies. We have seen the FANG stocks light up the sky, which is what market leaders do in bull markets. The question now is whether this rally can continue through November and December. These are historically strong months for the stock market, and bulls are hoping for a Thanksgiving Rally, as well as a Santa Claus and New Year’s Rallies. Earnings have been positive, and economic numbers have been good, so the odds of a strong finish to the year seems likely.

President Trump chose this past week to let Janet Yellen’s term end in January, and financial markets were not rattled at all. Janet was dovish on interest rates, and Jerome “Jay” Powell will likely carry on the calm and cool demeanor that Yellen had. Powell has been a Fed Board member for five years, and it looks as though Trump picked him because it will be a smooth transition that will keep in place the low interest rate policies that seem to be helping the economy and the stock market right now. Trump clearly does not want to do anything that will rock the bullish “apple cart” right now.

President Trump is off to the Far East on a 10-day trade and political mission, so we will see if he can make some progress. The Republican tax plan is in motion, so we will also see if Treasury Secretary Steven Mnuchin can make some headway in getting the details done quickly enough to get a vote before Thanksgiving. Trump has said that he wants a vote by Thanksgiving, but with the speed at which Washington runs, that might seem impossible. Congress will give it a shot, though, and with Trump away for ten days, maybe something will get done.

The amazing thing about the political picture in DC is that while no major legislation has been passed all year, the stock market has somehow boomed just the same. Maybe Congress should continue to delay action and just drag everything out into 2018. As long as the economy is strong, jobs are being created, and the stock market is booming, the bulls are not going to complain. That said, the Gorilla wishes each and all a relaxing November weekend ahead of what should be an interesting month. We will be back in action on Monday, so again, have a great weekend!

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