Time to get back to reality

The market will not stay worried about the market for the next 2 1/2 months just because Trump was elected President. We now return to the factors that actually impact sentiment: Buyers and sellers, companies and news. There will be earnings, there will be takeovers, there will be holiday shopping and there will be job reports.

While the comparisons with Brexit dominate the news, there is one major difference: The British vote involved the single issue of withdrawal from the EU. (And even then, the ultimate impact of that move is unclear — if it even survives the UK Supreme Court’s ruling early next year.) Trump’s victory, on the other hand, has much straightforward impact. Yes, there will be some pressure on trade partners like Mexico and China. But that will also take months/years to unfold… which takes us back to our first point: over those months and years we still face the reality of buyers and sellers, companies and news.

In the end, the market is like a pool: Its level is based on the amount of water (supply of equities) and the dimensions of the pool (investors). Trump’s election is a 400-pound person doing a cannonball in from the high board. Yes, it makes a big splash.. but over the long run it has much less impact.

That’s not to say it will be a smooth ride. There continue to be some signs of worry in the economy (jobs data has been somewhat weak recently) and of the possibilities of downside in oil. (API & EIA inventories both missed and the OPEC ministers are heading into their Nov. 30 with nothing in terms of production cuts.) The market was not massively impressed by the recent earnings season and there seems to be a lack of sector leadership in the market… but now we’re back to reality: Buyers and sellers, companies and news….

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