For some, this week represented a difficult choice.
"Do I stay loyal to what got us here," he asks, reflecting upon the last few months while gazing upon his own reflection, red cap pulled down tight upon his head, its crown crammed with the bold white letters of a winning campaign slogan. "Or do I commemorate this historic moment" he silently inquires of himself, switching to the just-as-fashion-backward DOW 20,000 baseball hat, both more likely conversation pieces than celebratory trophies not all that long ago.
For others, it was a time of study; picking apart the earnings reports that came in droves, on balance showing strengthening fundamentals, greater optimism about the future than in years past, supportive of a 17 multiple on the but not indiscriminately so, which is in itself supportive of further upside. Materials have been the leading sector in the S&P over the last year, YTD, month and five-day periods (through Thursday). But we saw choices being made.
The steel short I put on, noted in last week's letter, worked out well, although I worried about AK Steel when it reported a solid quarter. Not one to get greedy, I covered U.S. Steel early in the week and AKS early Thursday, knowing full well that rational thought can be fleeting (for the record, I am speaking about the rational thought that allowed those stocks to decline, not my window of lucidity that drove me to cover).
Alcoa reported a monster quarter as well but that didn't stop the sellers. The point is that there is finally divergence in the market — and that's a good thing. And then there is Caterpillar, the Cleveland Browns of the NYSE, who have a near-perfect record of something like 0-for-forever in meeting their own quarterly guidance. Sometimes it seems to me that its shareholders suffer from Stockholm syndrome because the stock just goes up.
And then there is the president. He certainly did hit the ground running, firing off executive orders that fulfilled his campaign promises and reiterating his vow to fulfill others. The market just doesn't seem to care — or maybe it does because midweek, after the bulk of the signings took place, and after the market weighed the consequences, it voted for red cap.
