WASHINGTON. Stocks got off to another rousing start at Wednesday’s opening bell. The Dow Jones Industrials (DJI) headed straight up once again, striving to meet or beat a +200 point surge. But averages quickly subsided mid-morning ET. The alleged reason? Congress and White House bickering on adequate funding for the Trump Wall could result in another Federal shutdown. Confused traders immediately began to hedge their bets late Wednesday morning.
Gaming the Trump Wall and the next Federal shutdown
Two excerpts, the first from CNBC online, provide some details.
“News outlets say President Donald Trump is expected to sign what lawmakers pass — even as Trump and his administration stress that he wants to see legislation before backing it. On Tuesday, the president said he was ‘not happy’ with the agreement but did not expect another shutdown.
“Still, a confusing rush to keep the government running looks likely in the coming days. About a quarter of the government shuts down if lawmakers fail to beat a midnight Friday deadline. At stake are the paychecks of about 800,000 government workers already battered from the last funding lapse, along with crucial government services such as food inspections and air traffic control.”
A foolish consistency
Meanwhile, the President remains infuriated about Democrats’ purely political opposition to the Trump Wall. They’ve voted for a Wall several times before. Now they oppose it strictly to prevent him from winning a round on his showcase 2016 Election pledge.
However, numerous pols and pundits believe he’ll likely sign the bill. Then he’ll turn the tables on the Democrats and invoke discretionary spending in some way, shape or form to get what he wants anyway. ZeroHedge sums up this side game with an economy of words.
“In an interesting twist, it looks like Trump has decided on a middle path that will allow him to keep the government open while getting more of his border wall built than Congress had initially authorized.
“According to WaPo, Trump will use an executive order to reallocate federal funds to finance the wall – or at least something more than the 55 miles that the compromise bill would finance.”
We’ll wait and see. But nothing is ever simple in today’s D.C. Swamp. Aside from their small but vociferous Socialist and anti-Semitic cadres, Congressional Democrats are wholly driven by screwing Trump. It seems they can’t drive him out of the White House, at least before his term is up. So the next best thing is to oppose him 24/7. Killing a Trump Wall here. Instigating a lengthy Federal shutdown there. Thwarting a duly elected President in anything and everything. What a party platform for Election 2020.
And how about that stock market?
At any rate, as we approach the noon hour, ET, the Dow is now up less than 100 points. The S&P 500 and the NASDAQ look a bit more anemic, although both averages remain slightly up on the day thus far.
While the twin Trump Wall and the Federal shutdown issues (with a little bit of China trade thrown in) do continue to vex the market, headline writers and financial reporters alike fail to mention another salient fact. The recent market run-up has proved so fierce that we could also be experiencing some completely logical profit-taking at this point, too.
After all, with political and trade confusion threatening to carry into the weekend, why stay fully invested. Having been ruthlessly clobbered last fall, newly wary traders and investors already know how smart that bullish strategy was in Q4 2018. Many portfolios have only recently gotten back to breakeven. And many traders and investors who run them are not going to let the bears take their gains away from them again.
What’s going on with stocks? Vs what’s really going on with stocks?
It is interesting to note discrepancies between the positive way Mr. Market is responding to current events and the doom and gloom sermons we’re getting from politicians and Wall Street gurus. As in, “Be very afraid of the coming Trump Recession.” (Not to mention the Trump Wall and the next Federal shutdown.)
As we’ve pointed out before, corporate revenue, earnings and profitability is highly unlikely to beat last year’s phenomenal returns. But that’s mainly due to the fact that 2018 was the first year in which the GOP tax legislation took effect, repatriating a ton of US corporate money from foreign banks while slashing taxes on both US corporations and individuals.
We fully expect mostly “unimpressive” numbers from most US companies in 2019, given year-to-year comparisons with 2018. But you have to look under the hood. That doesn’t mean a recession is around the corner. It simply means that 2019 likely marks a return to something that looks like normal business. That in itself is something we haven’t seen for most of this young century. Normal earnings and growth, however, does not equal a recession.
About that constant 2019 recession-mongering
Could we actually have a recession? Yes, of course we could. We could also be hit by an asteroid this afternoon.
Right now, all the recession handwringing in the media and elsewhere looks to us like just another tactic to make Trump look bad going into Campaign 2020. And as we’ve sadly seen in many other areas, the leftists currently dominating Democrats and the media still firmly believe that if you trumpet a lie long enough and loudly enough, it becomes the perceived truth.
In other words, to quote a once-famous political prophet, these nattering nabobs of negativism could arguably push us toward a recession via their endlessly negative prognostications.
Meanwhile, we have a wobbly Mr. Market to deal with Wednesday afternoon. As we near the 12:30 p.m. mark, major averages remain on the upside. But only by an approximate 0.25 percent. Who knows where we’ll end up at Wednesday’s close? Probably in this neighborhood, either slightly up or slightly down on the day.
We’re likely due for at least a bit of a healthy pullback at this point. But right now, the market’s direction is largely a matter of profit-taking and political talking points. Like that Trump Wall and the (allegedly pending) Federal shutdown this weekend.
– Headline image:Cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect.