A Monday Rally That Felt Better Than Last Week
Last week was horrible for the stock market. Because of Trump’s Steel and Aluminum tariffs threat, the markets once again tumbled more than 1,000 points. Did today’s Monday Rally bring everything back to normal? Well, realistically speaking it’s a good start to recovering from last week. Of course, the new Federal Reserve chairman Jerome Powell would bring the market indexes down every time he opened his mouth. That, along with fears that Canada and European countries would retaliate if stiff tariffs became a reality.
What the Monday Rally Could Mean
The big scare about stiff tariffs began to ease up early Monday morning, as investors’ worries subsided. The thing is, Donald Trump speaks, but nothing has been put in place. It’s ridiculous to place so much power on a tweet, but we are talking about unprecedented twitter activity by a POTUS that’s never been so prolific and caustic. Even Barack Obama never tweeted this much, and with such aggressiveness.
See Also: Stocks Surge as Fears of Trade War Ease
Will We Suffer Another Drop?
There are many different opinions running around regarding another potential drop.
The DOW ended the trading session at 24,874.76 today. Still far from the 26,000 all-time highs.
- We are still in for another drop. With interest rate hikes planned to go into effect in 2018, we could be in for some choppy waters, so chances are that we need to prepare for another big drop. Keep in mind that the DOW dropped more than 1,000 points last week. That’s a big drop.
- A presidency making big waves. Chances are high that we will have another big drop because of something happening with the current administration. This administration is under investigation and several people have been indicted, and there is evidence of Russian meddling in the 2016 election.
- Every time Jerome Powell speaks, stocks tumble. This has been true so far, and though he was painting a rosy picture about the economy, rate hikes have caused tremors in the stock market. Last week, every time Mr. Powell spoke, the stock market plunged.
- Treasury bond yields have risen. And for some reason this has caused equities to plummet. I’m not really sure about this phenomenon, as I only invest in equities and avoid stocks, although the experts tell you to maintain a good ratio between stocks and bonds.
- The dollar continues to weaken. And the Euro continues to get stronger. And they talk about the economy getting stronger, but I have my doubts. For one, Retail Stores continue to suffer. JC Penney, Nordstrom, Macy’s all are suffering and making changes in a world where Amazon and other online stores are doing much better. In addition, oil companies are suffering and their stocks are down.
For the investor, it would be wise to restructure your portfolio to prepare for the next big drop. Keep cash ready to sweep up stocks when this big drop occurs. Check your charts to see when buying picks up. But beware of double-dips the likes of which happened in February.
For the long term and value investor, no worries if you intend to hold your stocks for 3-5 years. If you have good solid companies with strong fundamentals, then those equities will withstand the turbulence.
Note: The stock market is subject to volatility. Trade at your own risk!
More Investing Thoughts
Trading Notes: Analysis of a Day Trade
Saturday November 17, 2018 by Carlos Rull
Filed as: Money, Renegade Mobile Trader, Trading Notes
Friday, November 16, 2018: Volatility Equals Day Trading Opportunities
Friday November 16, 2018 by Carlos Rull
Filed as: Money
Friday, November 9, 2018: Post-Midterm Election Update and Day Trading
Friday November 9, 2018 by Carlos Rull
Filed as: Money, Trading Notes
Wednesday, October 31, 2018: Halloween Edition – Bears Were Spooked!
Wednesday October 31, 2018 by Carlos Rull
Filed as: Money, Stocks
Tuesday, October 30, 2018: Day Trading and the Volatility Index
Tuesday October 30, 2018 by Carlos Rull
Filed as: Money, Trading Notes