Stocks up again Tuesday, erasing last week’s scary selloff

Despite Manchester terrorist attack, S&P 500 back above its previous high, followed by DJIA. Tech stocks pull back a bit, keeping NASDAQ slightly in the red.

First two pages of the 1840 children's illustrated book: "The Remarkable Story of Chicken Little." (Image via Wikipedia entry on Chicken Little, long out of copyright)

WASHINGTON, May 23, 2017 – Weather-wise, it’s a gloomy Tuesday here in the Washington, D.C. metro area. But investing weather is sunny for the second straight day this week on Wall Street, at least as we approach the 2 p.m. mark ET. Stocks seem to have shrugged off some pre-market nervousness over the tragic suicide bomber terrorist attack in the UK industrial city of Manchester Monday night, and have picked up on Monday’s upward trajectory.

The Manchester terrorist, who may have had some outside assistance, apparently detonated a nail-filled explosive vest, maiming dozens of mostly youthful pop concertgoers as they were exiting the venue and killing a total of 22 as of the most recent estimate by UK officials.

Markets are cold virtual beings, however. It seems that once the terrorist attack was deemed unlikely to be part of a coordinated effort, traders breathed a sigh of relief and got back to the business of making money as the earth continued to rotate on its axis.

Donald Trump’s apparently considerable success in Middle-East negotiations on his current trip also continues to buoy traders, particularly in the defense and materials sectors. Financials seem to be looking up as well, although the jury is currently out on that once “for sure” and now “maybe not” June Federal Reserve interest rate hike we’ve been reading all about.

Read also: Are water and sand stocks in your investment portfolio?

In the wonderful world of stock analysts, it seems as if half of them are looking for an imminent market crash, while the other half predicts a bull market without end, Trump or no Trump. The former class of analysts, who have behaved like perma-bears since last November keep shouting “bubble” this and “bubble” that. But in the world of investment journalism, this now grossly over-used term is quickly losing its meaning due to over-use, particularly since the Chicken Littles who are shouting “The sky is falling!” have yet to be right.

Of course, if they keep proclaiming an epic stock market crash long enough, odds are that these bearish analysts will eventually be right about that “bubble.” But will their brave negativity be vindicated in 2017 or 2057? No one, including these analysts knows for sure, though that won’t deter them from crying “Wolf!” every time they’re invited to gasbag on CNBC or Fox Business. We have better things to do. (And sorry for the mixed metaphor.)

As for us, we’re fiddling around with existing positions, but are still largely in “Sell in May” mode. There is so much political goofiness affecting markets currently that initiating dramatic new investing positions is probably not a very good idea for us.

It’s usually best to be cautious when markets are so touchy about political and headline risk, which today are one and the same. Even one scary “fake news” story can still do lasting damage to a portfolio that’s not diversified, which is why at least some diversification is always a good idea.

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