A record nine consecutive trading-day decline in the pre-election. Then, President-elect Trump, catalyzing an upside breakout of an 18-month trading range in equities, decimating sovereign debt globally, including one of the fastest backup in 10-year yields ever experienced, threatening a multi-decade bull market in bonds, and threatening to stoke the near moribund flames of tepid inflation, a task that trillions in monetary stimulus and millions of words and phrases too carefully uttered by central bankers have been unable to accomplish. And the First Twitter account going virtually silent on November 9th!
All surprises – just like a child's first visit to the Fun House, a new surprise has accompanied each day of trading, a continuation of Brexit and its aftermath, the lesson being that George Santayana is definitively out of style and the only condemnation is accorded to those who ignore the money flows rather than those who ignore the past because there is no playbook to refer to, no Yoda to consult, and no three-year period of underperformance to rely upon before your assets go elsewhere.
Unquestionably, the market has had a very strong, very bullish tone to it since Trump took the election, but underneath the headlines investors have been making choices. The more dollar=sensitive index, the S&P 500, stands alone in not making a new high and sector performance, away from financials and industrials, has averaged about plust 2 percent except for the yield stocks, including consumer staples with exposure to both the dollar and yield, have been hit hard. The smaller cap, more domestically focused Russell 2000 has been a meteor shot.
Then there is tech. In the immediate aftermath of the election, the tech sector was the ATM for healthcare, banks and industrials, but has since recovered and is essentially flat since November 8th.
What I find frightening about all this newfound positivity driving markets higher is that it actually makes a lot of sense to me – and not just in retrospect.