[table “230” not found /]
We (the ‘experts’) were all trumped by the Trump market reaction but it was the best trumping of all, with stock markets revising their views on Donald – the 45th President-elect of the USA. That said, you have to wonder, as that old movie once asked: “What just happened?”
I’ll leave that for Monday’s story and add to it what is likely to keep happening, but there are US experts flexing their mental muscles and their mouths with “Dow 20,000 here we come!”
That seems a huge call, with the index at 18,807 (as I write) but in reality it’s only 6.3% away. So where could we end up? Charlie Aitken reckons the Aussie market could be a bigger reactor going forward and in the right direction! And given resource stocks and banks are beneficiaries of Trumponomics, maybe the ASX200 at 6000 could be the overdue Christmas gift we have to have.
Of course, this is wishful thinking but 5700 now looks possible, which would be around a 6% gain. If Charlie is right, then 5800 is looking doable but let’s leave all that speculation for Monday.
By the way, Charlie isn’t alone on positivity, with Warren Buffett (a huge Trump critic and Hillary-backer) reportedly making a “huge bet” on Wells Fargo, despite its current regulatory problems, in a Trump-determined future.
And Deutsche Bank’s US equities team has especially given the thumbs up to health and financial stocks for the rest of the year. Why? Well, a Trump administration is set to be less Hillary-like on health and drug companies. Meanwhile, banks are to benefit from less tough regulation and from what is called the reflation trade, as fiscal expansion pumps up infrastructure spending, economic growth, inflation and interest rates.
Donald is taking us to La La Land but perversely it might be the confidence circuit-breaker the USA and world economy needs (once again, I’ll examine this in Monday’s Switzer Report).
At home, Trump’s win saw the S&P/ASX200 Index climb 3.3% to 5328.8 points – the biggest one-day surge since October 2011.
But Wednesday (poll day) was harrowing, with the Index up 57 points in early trade and down 206 points (or 3.9%) at one stage. The Index closed down 101 points (or 1.9%). Worse was expected on Thursday when the numbers were confirmed but we were trumped with positivity and a rally!
Market capitalization had fallen by around $34 billion on Wednesday but by Friday we put on about $74 billion – that’s Trumpification quantified!
This rally will be tested but I do like the fact that Wall Street remains un-panicked by Trump and even the Nasdaq joined the party, going higher after two down days.
What I liked
- The stock market reaction to the Trump victory. I never saw that coming, although I hadn’t ruled out a Trump win but the positive reaction in such a short period of time? No way! That said, I love the fact that the reaction means the Fed can raise rates in December because Trump has not KO’d confidence, which was expected pre-poll.
- The US Federal Budget was in deficit by $US44 billion in October while the forecast was $US80 billion. Donald has inherited an OK financial situation.
- The NFIB business optimism index in the US rose from 94.1 to 94.9 in October.
- The global Purchasing Managers Index hit an 11-month high.
- Metal prices and bond yields also rose on expectations of stronger US government spending.
- BHP beat $25 this week but finished at $24.94.
- The NAB business conditions index eased from +7.8 points to +6.2 points in October but it still beats the long-term average of +4.8 points. Unfortunately, the business confidence index fell from +6.0 points to +3.7 points (long-term average +5.8 points) but it could be US election fears related. Let’s hope Donald turns it around in November.
- Data released yesterday showed that job advertisements rose by 1% in October to a 4-year high.
- The number of loans (commitments) for budding home owners (owner-occupiers) rose by 1.6% in September after falling 2.7% in August.
- Tourist arrivals rose by 2.6% in September. And departures fell by 0.3%. Arrivals are up 11.5% on the year with departures up 4.7%. Tourists from the US have surged by almost 18% in smoothed terms in the past year – the fastest pace of growth in records going back 26 years.
- Over the year to October, Chinese consumer prices rose by 2.1% (forecast 2.1%). Producer prices rose by 1.2% in the year to October (forecast 0.8%) – the biggest annual gain in almost five years.
- Santos shares jumped more than 6% after Chinese private equity firm Hony Capital paid $159 million to increase its stake. Santos shareholders have been in need of a bit of help but it does say something positive about oil, doesn’t it?
What I didn’t like
- US hi-tech stocks got a caning post-poll.
- Capital Economics thinks China and Brazil could kill off the iron ore price spike. (I’ll look at this on Monday.)
- The monthly Westpac/Melbourne Institute survey of consumer sentiment fell by 1.1% in November, after rising by 1.1% in October. The confidence index is down 0.4% on a year ago. The survey was conducted between October 31 and November 5 and the response to the question of whether it was a good time to buy a dwelling fell to a 7-month low. (However, the ANZ/Roy Morgan consumer confidence rating rose by 3.2% to a 5-week high of 117.8 in the week to November 6. Confidence remains above the average of 112.4 since 2014.)
- The Federal Bureau of Investigation concluded its inquiry into the email practices of Hillary Clinton but it was too little too late for poor Hillary!
What a week!
Some things that seem important at the time get erased by the vagaries of our memory and what we prioritize in our brain with its limited capacity to store. However this week, when the world was ‘Trumped’, will be unforgettable. As an optimist, who currently is bullish on growth, earnings and stocks (at least right now), this week has worked out miles better than I expected and we all should be happy, if only for material reasons.
I wish America and the rest of the world the best with this experiment with Donald Trump. The former US Vice President, Dan Quail, says the Oval Office has the ability to shape US presidents, so let’s hope he’s right. If Trump can bring his winning, brand-building ways (with refinement from the Oval Office) to running the US, we could be in for a pleasant surprise.
That’s my positive spin and I’m sticking to it.
Go USA! Let’s hope the trumpeter plays a tune the whole world enjoys.
Top stocks – how they fared
[table “229” not found /]The week in review
- I revealed the companies [1] my expert buddies are keeping on their ‘watchlist.’
- Paul Rickard recapped the performance of our model income and growth portfolios – both outperformed the stock market in October [2].
- James Dunn shared five stocks under 50 cents [3] to keep on your radar.
- The brokers placed CSR (CSR) and REA Group (REA) in the good books this week while Speedcast (SDA) was downgraded [4].
- Our Stock Selectors liked Oz Minerals (OZL) and Origin Energy [5] (ORG) [5].
- Charlie Aitken explained what’s behind the movements in US equity markets. Plus, he gave an update on APN Outdoor [6] (APO).
- Tony Featherstone outlined what a Trump win means for gold in the medium-term [7].
- Sean Fenton explained why he likes Clydesdale Bank (CYB) in Professional’s Pick [8].
- In our second broker report, Domino’s (DMP) and Suncorp (SUN) made it to the good books while Westpac (WBC) was downgraded [9].
What moved the market?
- The Trump shock – or Brexit 2.0! And what a market rollercoaster it was!
Calls of the week
- America’s ‘silent majority’ called for Donald Trump to be the 45th President-elect of the United States.
- Tony Featherstone says the Trump wild card strengthens the case for gold and other safe-haven assets in the medium-term. Find out how to gain exposure [7].
- And CBA shareholders delivered a ‘first-strike’ vote against the bank’s payments to top executives.
The week ahead
Australia
- Monday November 14 – Credit & debit card lending (September)
- Monday November 14 – Lending finance (September)
- Tuesday November 15 – Weekly consumer sentiment
- Tuesday November 15 – Reserve Bank Board minutes
- Tuesday November 15 – Speech by Reserve Bank Governor
- Wednesday November 16 – Wage price index (September quarter)
- Wednesday November 16 – New motor vehicle sales (October)
- Thursday November 17 – Employment/unemployment (October)
Overseas
- Monday November 14 – China monthly data (October)
- Tuesday November 15 – US Empire State manufacturing (November)
- Tuesday November 15 – US Retail sales (October)
- Wednesday November 16 – US Producer Prices (October)
- Wednesday November 16 – US Industrial Production (October)
- Wednesday November 16 – US NAHB Housing market index (November)
- Thursday November 17 – US Housing Starts (October)
- Thursday November 17 – US Consumer Prices (October)
- Thursday November 17 – US Philadelphia Fed survey (November)
- Friday November 18 – US Leading Index (October)
- Friday November 18 – Chins property prices (October)
Food for thought
Success is not final, failure is not fatal: it is the courage to continue that counts.
– Winston Churchill
Last week’s TV roundup
- One small cap that has been shooting the lights out is Catapult. To discuss the growth of the business, Adir Shiffman [10] joins Super TV.
- James Dunn tells us all about his stock tips under 50 cents [11].
- Charlie Aitken [12] explains what happened on the stock market following the election of Donald Trump as President.
- And to discuss the surprise US election outcome and the market’s wild response, Michael McCarthy [13] of CMC Markets joins the show.
Stocks shorted
ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table also shows how this has changed compared to the week before.
This week one of the biggest movers was G8 Education with a 0.96 percentage point increase in the proportion of its shares sold short to 9.47%.
Source: ASIC
Chart of the week
Stocks ride the Trump wave
Is this the start of a long, crazy market ride? The chart above shows the initial reaction to Trump taking lead (see huge dip above) and after, when stocks bounced back over 3%!
Mass exodus? Americans search for jobs in Canada
Business Insider, Indeed
The Canadian immigration website crashed in the wake of Donald Trump being declared President-elect – and this chart shows part of the phenomenon. US job searches for jobs in Canada surged almost 6% between 6pm and midnight on election night!
Top five most clicked stories
- Peter Switzer: The US poll and stocks you should consider [1]
- James Dunn: Five stocks under 50 cents [3]
- Tony Featherstone: US election jitters creates healthcare buying opportunity [14]
- Charlie Aitken: Hedge Funds get trumped…and APO upgrades guidance [6]
- Paul Rickard: Portfolios outperform in October [2]
Recent Switzer Super Reports
- Thursday 10 November: Trump wins [15]
- Monday 7 November: To the polls [16]
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.