Trump-mageddon: Should investors stay or should they go?

Market averages reverse field in a major way in Friday trading action. Is the current tranche of anti-Trump fake news over? Or should we still Sell in May?

Cartoon by Branco. Reproduced with permission. (See below)*

WASHINGTON, May 19, 2017 – It began with a big bounce after a poor opening bell on the morning of November 9, 2016. The Great Trump Stock Market Rally continued almost unabated until it began to show signs of faltering in February, 2017.

Things got dicier in March and April, as stocks bobbed to and fro, backward and forward until they took a massive hit earlier this week, borne over the cliff by the endless media-led Trump impeachment hype set in motion by the firing of former FBI Director James Comey.

Now, all of a sudden, beginning with Thursday’s trading action, our formerly crashing U.S. stock market averages are singing “Happy Days Are Here Again” even as President Trump begins his Middle East travels that will likely offer even more opportunities for negative spinning by the anti-Trump media, justly characterized by Instapundit’s Glenn Reynolds as “Democrat operatives with by-lines.”

As we noted today in our companion column, this constant, hyped-up political frenzy is increasingly providing traders with a concerning backdrop of “headline risk” such as we’ve rarely seen before – not since the Watergate Scandal to be precise. Which analogy, of course, the fake news experts are now hyping each and every daily news cycle.

Read also: Trump scandals? Nothing to see here, Wall St., move along now

In such an environment, investing in stocks and bonds, which always carries financial risk anyway, now carries an added burden of acute and constant headline risk. This, in addition to the annual arrival of “Sell in May” syndrome, has made trading and investing a complicated headache as the summer season approaches.

So, as The Clash once famously asked, should we stay or should we go?

Trading Diary

Seriously, what should we, as disciplined investors, do today, tomorrow and in the coming weeks and months?

Short answer: Not much.

Longer answer: We should (or will) –

  • Add to very long-term positions on significant dips. Our long-term positions in this category include several preferred and term-preferred stocks, plus some recently acquired shares of Bank of America (symbol: BAC) and Federal Agricultural Mortgage Corp. (AGM, aka “Farmer Mac”); plus other financial sector holdings we’re already holding, like Blackstone (BX) and Carlyle Group (CG). The Fed may or may not hike interest rates again in June, but they’ll continue to do so anyway, little by little, which can only help investments in this sector, though it will take some patience to see this kind of incremental action through to its conclusion.
  • Hold our large positions in Allergan convertible preferred “A” shares (AGN/PRA, your broker’s symbol may vary) and Cliffs Natural Resources (CLF) the latter of which, this week, at least looked as if its horribly depressed (and heavily shorted) shares were finally trying to get up off the mat, having found a bottom at around $6 per share. Maybe.
  • Add incrementally to several small and growing positions in select Schwab ETFs which, since we keep our accounts with that brokerage, don’t charge any commissions on these trades. Currently we’re having good luck with the following Schwab ETFs: Emerging Markets (SCHE), U.S. Large Cap Growth (SCHG), U.S. TIPS (SCHP) and U.S. Large Cap Value (SCHV), the latter of which is heavy with financials, which we currently like.
  • Look for opportunities to add to our small positions in the fossil fuel and oil patch, namely Royal Dutch Shell series A shares (RDSA or RDS/A); recent IPO Hess Midstream Partners LP (HESM), a master limited partnership we continue to hold for now; U.S. oil and gas giant Conoco Phillips (COP); pipe and compression equipment manufacturer Chart Industries (GTLS) and the new IPO of an old veteran in the same area, Gardner Denver Holdings (GDI); and the 8 percent term-preferred stock of TravelCenters America (TANNL), which took a dip this week and remain a buying opportunity. We’re also looking to get back into our favorite refiner, Valero (VLO).
  • We continue to hold mostly property-owning REITs and may add to positions on dips. Current holdings include a good-sized position in Independence Realty (IRT) which pays its above-average dividend monthly; recently aggregated shares of a company now known as Colony Northstar Inc. (CLNS); property-owner/debt servicer New Residential (NRZ); and non-REIT western U.S. builder Taylor Morrison Home Corp. (TMHC).

In the main, however, we’ll be taking our time and holding as much cash as we can.

*Cartoon by Branco. Reproduced with permission and by arrangement with LegalInsurrection.

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