Is The Stock Market Heading Higher?

Summary

  • A change of administration typically means new policies that impact economic growth.
  • The first two weeks of the new administration have been fairly controversial.
  • The stock market has consolidated and absorbed the early news flow as it edges higher.
  • Is it time for a change in the stock market trend or can it still move higher?

Graycell Advisors - NYSE

Market Pulse

The first two weeks of Trump administration have not been without controversies. Even though any new administration has growing pains and takes the time to settle down, particularly one that is relatively unconventional, the events provide a flavor for things to come.

One thing is clear. President Trump wishes to hit on his campaign promises, including some of the controversial ones, right away.

This means that the travel ban is just the beginning, and there will be more such controversies in the months ahead. Controversies can unsettle the market, leading to enhanced volatility. That is what we believe investors have to be prepared for in the upcoming months.

But controversial policies by themselves do not derail a stock market.

In the past we have discussed the three key supports for the market - Earnings, Economy and Monetary Policy - including in the article titled, The Return Of The Fundamentals.

The impact of the controversies has to be viewed through the prism incorporating these three market supports in order to arrive at a more informed opinion about the market.

When one wears an investor hat, the focus should be on investment returns, and how the policies impact the portfolio. Such a review should take care to not be affected meaningfully by personal opinions on the broader correctness, merit, or prudence of various policies.

Policies considered divisive may collectively end up tipping the scales eventually and hurt consumer confidence and investor sentiment. But, at this point, we are not there yet.

Presently, the stock market has the necessary support to move higher. Staying the course remains an optimal strategy!

Graycell Advisors - Earnings, Economy, Monetary Policy

Earnings

The reported earnings have been strong thus far with many upside surprises as judged by the S&P 500 reports. Of the 275 S&P 500 companies reporting as of end of last

This article was written by

Tarun Chandra, CFA profile picture
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A healthcare growth portfolio with a record of consistently strong returns

I have worked as an Analyst on both the Buy (Asset Management) and Sell (Investment Brokerage) sides, as well as in Strategy and Finance roles for technology services companies. For many years, I have been publishing risk-adjusted, return-driven quantitative model portfolios.


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