WASHINGTON, Nov. 2, 2015 – After uncertain and slightly negative pricing at Monday morning’s opening bell, all U.S. averages have apparently decided to celebrate the first trading day of November with modified irrational exuberance. Building on October, alleged to be “the best trading month in four years,” today’s action is apparently bent on keeping an early-arriving Santa Claus rally intact.
Bulls seem to be getting back into the biotech and healthcare stock buying habit once again this morning as well. Those sectors are doing well, and will likely continue to do so unless we start getting more negative Obamacare rumblings later in the week. Enrollment is open again at HealthCare.gov and by all accounts is going smoothly (at last).
However, current and prospective insureds will be facing the kind of sticker shock we’ve been predicting, with average premiums up 7.5 percent or more and with some premiums now priced considerably higher.
Back to the better news, part of this morning’s trading optimism allegedly extends from decent ISM (Institute for Supply Management) manufacturing data reported this morning, data proving that the U.S. economy is at least still functional, particularly regarding continued bullish news on construction. What’s funny is that the ISM October manufacturing number was 50.1, only slightly exceeding September’s 50 and marking the fourth monthly decline in a row for the index.
But perhaps we’re back to the “bad news is good” phenomenon, the zeitgeist created over the last several years by the Fed’s zero interest rate policies, which were designed to goose stocks and create the impression of wealth. One of these days, we’ll see how that worked out for the average American. It sure worked out for corporate fat cats with stock options and for anyone who had enough money after 2008 to build up a big stock portfolio.
Markets at the moment are neither oversold nor overbought, although they could get overbought this week leading to more sideways trading.
Trading tip-wise, we are more or less sitting on the sidelines. Our bank merger bets, involving New York Community Bank (symbol: NYCB) and First Niagara (FNFG) took what for us was a surprise hit last week, proving that at least for the moment, a chunk of investors don’t see much good in bank merger action.
On the other hand, with many large banks still effectively constrained in the consumer loan arena due to asinine Dodd-Frank restrictions, smaller regionals are likely to do better and do it more quickly when the Fed finally does start notching those interest rates up again, whenever.
But if there’s anything we’ve learned in 2015, it’s that everything we’ve learned over 35 years of investing is no longer operational. At least for now. Headlines and propaganda (and phony information plants) drive this market, not earnings per share or chart patterns, thanks to those friendly crooks running supercomputers for the HFTs.
More later, when we can parse it out. Have a good week.
Note: Content in this column is informational only and should not be construed as buy or sell recommendations.