At this time yesterday morning, the thinking in the market was that if the GOP Healthcare bill was passed Thursday night, traders could breathe a sigh of relief and look ahead to the more important stuff - aka Tax Reform and stimulus spending. However, the computers were also programmed to sell if the vote failed or was delayed. The idea here was that "business as usual" in D.C. meant the important issues to the market could very easily wind up getting pushed down the road.
While stocks did sell off yesterday afternoon when word hit that Speaker Ryan was first postponing his news conference and then the vote on the healthcare bill, the anticipated bloodbath did not ensure. Sure, the DJIA gave up 120 points or so and the rest of the major indices went from green to red. But this was not the massive selloff the might have been expected.
What gives, you ask? Why did traders and their computers exercise restraint in the face of an obvious "sell first and ask questions later" opportunity?
In the immortal words of SNL: "Strategery."
Late yesterday afternoon, President Trump, who also happens to be the author of the best-selling book "The Art of the Deal" and is purported to be a pretty good negotiator, declared that the time for political wrangling was over and it was time to vote. The confusing part here was the GOP wasn't actually sure they had the votes to pass the bill. So, the question became, why was the President drawing a line in the sand at this point? Ego? Power? Establishing a precedent?
This morning, the answer appears to be obvious. Trump has declared that it's now or never. Either vote to "repeal and replace" Obamacare now - or - and here's the important part - he's moving on to the things the markets care about - tax reform and stimulus.
Thus, Trump is saying to the House, okay, I gave you guys what you wanted. You all pledged to repeal Obamacare. So this is it - take your shot. If you fail, then we are moving on to what is more important to me.
And the bottom line is that so far at least, this represents a fresh approach in Washington and something that markets appear to be happy with. Well, for now, anyway. Stay tuned.
Thought For The Day:
"Vision without execution is hallucination" -Albert Einstein
Current Market Drivers
We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).
1. The State of Trump Administration Policies (Specifically Healthcare in the Short-Term)
2. The State of the U.S. Economy
3. The State of Global Central Bank Policies (Think ECB pulling back on QE)
Wishing you green screens and all the best for a great day,
David D. Moenning
Chief Investment Officer
Sowell Management Services
Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any time.
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