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November 25, 2016

POST-ELECTION TRUMP LOOKS A BIT DIFFERENT THAN PRE-ELECTION TRUMP.



Industrial and Defense Stocks have led the Market to new highs as consumers and investors have embraced the post-election statements of Mr. Trump optimistically.

Mr. Trump’s poise and dignity, that seemed lacking throughout the campaign, has emerged, and as a result optimism as developed throughout America and the world.  Financial markets have rallied globally.  The Dow Jones industrial average broke 19,000 for the first time and most industrial based stock indices are at new highs.  Contrarily growth indices have encountered fear-based obstacles and have lagged the industrial based leadership in the market. Since the election defense and aerospace, heavy construction, and bank stocks have led the market and have advanced double digits, despite virtually no confirmation from Wall Street analysts with higher revisions to earnings for these groups.

Wall Street analysts are almost always late to the party and their earnings expectations generally lag investor’s intuitive moves in the market.  These Intuitive forward-looking investors unfortunately get things wrong more than right and one must wonder if the current moves in these industrial groups is well thought out. Will Donald Trump makes substantial investment in new weaponry for America despite America being $17 trillion in debt?  Will that same debt prevent Mr. Trump from building the wall and rebuilding our infrastructure?  Investors sold bonds and have driven up interest rates on US treasuries by three quarters of 1% since the election on speculation that America will spend trillions over the next four years on Mr. Trumps plans.   These questions will remain unanswered for months as we await announcements by the Trump administration and the opponents of his agenda. In the meantime the markets will be volatile as the views of intuitive investors settle.

In the meantime economic data continues to tilt up toward. Consumer confidence continues to rise and retail sales and US consumption shows early signs of accelerating.  The nation’s money supply (M2) has been growing above trend for several months and it is highly likely this blip in growth will lead to acceleration in consumption for the next six months or more.  This will be a welcome change to the stagnant growth we have had for the last few years. It is not surprising that the market is moving higher given this improving economic picture combined with a president-elect who now looks Presidential.

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