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Market Indices Push Up Into Nosebleed Territory

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Tematica Research

As we move into the 101st month of the current economic expansion, the respective stock market indices have continued their climb further into nosebleed territory. On Thursday, the S&P 500 avoided its first back to back daily declines in about a month after a rally into the close pushed it back into positive territory for the day, while today the Dow Jones Industrial Average touched a new all-time high. The headlines are all about ebullience in the markets, but in this week's wrap up, we'll point out that there are plenty of yellow flags waving.

This week was seriously action packed from finally getting a tax bill proposal that the majority of House Republicans can support, to the issuance of indictments for Paul Manafort, Rick Gates and George Papadopoulos, to President Trump announcing current Fed Governor Jerome Powell as his pick for the next Chairman of the Federal Reserve and yet another brutal terror attack in Lower Manhattan. Mr. Powell will need to go through the formal Senate confirmation process (otherwise known as politicians competing for airtime while sneaking in wholly unrelated topics they want to be seen as caring about and showing how they don't really understand monetary policy), but is expected to be approved by a decent margin. If the current chair Janet Yellen does not stay on as a Governor, four out of seven Fed Board seats will have vacancies, giving the Trump team an unusually profound ability to dramatically reshape the Fed. If the markets have benefited to the extent we suspect from the Fed's policies, a change in tenor is worth a close watch.

Thursday Apple's (AAPL) stock gained over 3% after posting fourth-quarter results that beat expectations by a material margin at $2.07 EPS versus the consensus for $1.87 - and that doesn't include sales for the iPhone

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Tematica Research profile picture
We see Investment themes at work and at play every day in the economy — oftentimes across industries and categories — and other aspects of day to day life. It is the opposite of the typical Wall Street approach to research, which oftentimes overly focuses on a single industry at a time and results in missed opportunities. These themes are identified by looking at the intersection of shifting economics, demographics, psychographics, technologies, mixed in with regulatory mandates and other forces. In other words, looking at the real world that companies are operating in! Some businesses will adapt, while others will leap frog ahead riding these thematic tailwinds to profits and significant share price movements, and sadly there will be those left floundering too. For every Apple, there is a Palm and Blackberry. For every Facebook . . . a MySpace or Friendster. For every Netflix, there’s a Blockbuster. The list goes on and on, even in non-technology categories. By examining these thematic tailwinds, our goal is to identify mispriced securities relative to the business opportunities ahead and avoid those that are overly valued and or staring down the barrel of significant headwinds

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