US Electoral College is expected to select Donald J. Trump and Michael Pence, officially, as President and Vice-President Elect today.
After five weeks of robust gains, as expected, this week’s post-election rally lost both some velocity and the sponsorship of the financial sector. The financial sector’s most closely watched proxy, the financial select sector SPDR ETF (XLF) slipped 1.6 percent on the week, its worst weekly performance since early November, ending a five-week stretch of gains.
The pause in our equity market rally is not in anyway unexpected, particularly given the fact that all three majors have posted their most robust gains over the past five weeks in years. A less scientific but no less significant hurdle on investors’ minds is the rising psychological significance of breaching the 20K level on the Dow Industrials for the first time in history. Often investors and markets have approached milestones with trepidation.
For example, as a NYSE member and media commentator in the weeks and months leading up to the Dow 10K trade, markets zigzagged for weeks just below the 10K level before finally punching through in a dramatic trade higher that was celebrated with Dow 10,000 caps all over Wall Street.
With the post-Presidential election rally in pause mode, the FOMC December interest rate move behind us and the year coming to a close, investors are looking ahead. To a degree, that vision includes predictions of robust equity market gains, improving economic conditions, a stronger dollar, lower gold prices and higher interest rates.
The week ahead will likely keep equity markets in a holding pattern as volume dries up heading into the Christmas weekend. The economic calendar is very light. Janet Yellen is speaking on Monday at 1:30 PM EST. Wednesday we receive Existing Home Sales and the EIA Petroleum Status Report. Thursday’s schedule will provide the lion’s share of economic data for the week; Durable Goods, GDP, Weekly Jobless Claims, Chicago Fed National Activity, Corporate Profits, FHFA House Price Index, Personal Income and Outlays, Leading Indicators and the Kansas City Fed Manufacturing Index. New Home Sales and Consumer Sentiment will be released on Friday.
Investors have been given their Christmas gift early this year thanks to the market’s response to Trump’s unexpected election night victory. It will be in the unwrapping of that present in 2017 that investors will find out whether or not the present they asked for is what they got.
Flickr photo: Anthony Quintano