Corporate Tax Cut Talk to Goose Stocks

Investor’s first read – Daily edge before the open
DJIA: 19,884
S&P 500: 2,280
Nasdaq Comp.:5,636
Russell 2000:1,357
Friday, February 3, 2017 9:08 a.m.
The stock market is adjusting to the shock and awe of the first 14 days of President Trump’s administration. To-date, the S&P 500 is the same as it was on Inauguration Day.
Talk will soon turn to a big tax cut for corporations, the elimination of regulations imposed in 2010 to prevent the Street from ripping off investors again, and a little later, a big spend on the infrastructure and the military.
If that doesn’t blow the market out of this tight sideways trading pattern, we have a problem.
In the interim, it is important for the bulls that the Trump administration stays out of a war with Iran, Mexico, Australia or California.
To its credit, the market has been incredibly resilient in face of more uncertainty than it has faced since the big crunch in 2008 – 2009.
Are we to thank the quants for that, since they may not have programmed their computers to worry about anything a bizarre as what we are seeing from the Trump administration ?
I don’t have a problem with that, but what happens if reality strikes and the Big money investors, who can think for themselves, pull the plug, deferring purchases, and selling ?
Remember that possibility, as the market resists discounting negatives that in another time would have taken the market down to a level that more realistically discounts uncertainty.
As I have noted numerously, the stage is set for a big move up, especially if corporate earnings extend gains we saw in Q3 and Q4.
Perhaps what is being done in Washington is a greater threat to our constitutional (representative) republic than to stock prices. Then too, it just may be a delayed reaction.
RESISTANCE “today”:DJIA:19,987;S&P 500:2,293;Nasdaq Comp.:5,663
– the prospect of big corporate tax cuts, deregulation, a big spend on the military and the infrastructure and the restructuring of long-standing trade agreements.
-the uncertainties of the repeal of Obamacare
-talk of privatization of Medicare and Social Security
-possible undermining of NATO and the European Union
-a trade war of sorts.
-lifting of sanctions on Russia for its incursion in the Crimea and actions in Syria, adding to questions already breached.
-continued internal polarization of America and the possible extension of such to other countries.
-intense economic stimulation by the Trump/Republican Congress stands to trigger a rebound of inflationary pressures forcing the Fed to bump interest rates sooner than expected.
-an increasing erosion of investor confidence in President Trump
IMHO, there is an element in this administration that wants total power,and will gut whatever necessary to gain it – they are “The Enemy Within.”
The Trump administration is all about the Alt-Right conservatives gaining total control of our governance. The neocons in high places in the George W. Bush administration (Cheney, Perle, Rumsfeld, Wolfowitz,Woolsey, Abrams, Bolton) were signatories to the Project For a New America (PNAC), now the Foreign Policy Initiative, and were instrumental in the invasion of Iraq, which totally destabilized the Mid-East. In fact, the PNAC urged the removal of Saddam Hussein as early as 1998.
I think the Alt-Right’s influence in the Trump administration will be worse, challenging the existence of our constitutional republic.
The major player in Trump’s administration for the Alt-Right is Stephen Bannon, chief strategist to President Trump and reportedly the mind behind many of the decisions coming out of Washington. In 2012, Bannon took over Breitbart News, a far-right news and opinion website, which according to Time has a racist, sexist, xenophobic, and anti-Semite focus. In 2016m Bannon prefers to be identified as ant-establishment, against today’s permanent political class.
This is disturbing and in time could adversely impact stock prices, since destabilizing the United States would cripple confidence in our institutions, one of which is the stock market.
Corporate earnings (update)
Factset now sees Q4 earnings for the S&P 500 up 3.4% vs. a Dec.31 est. of 3.0%.. Earnings for 2017 are expected to increase 11.4%. Currently, the P/E based on earnings 12 months out is 16.9 x, which compares with a 10-year average P/E of 14.4 and a 5-year P/E of 15.1.
On occasion, I technically analyze each of the 30 DJIA stocks for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the new DJIA “divisor” (0.14602) to get the DJIA for those levels. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages.
As of January 27, 2017, a reasonable risk is 20,013 a more extreme risk is 19,947 Near-term upside potential is 20,288.
 OPPORTUNITY: RISK: Selective opportunity ! Risk is reality at some point
 CASH RESERVE: 25% – 35%.
 KEY FACTORS: Speculative fever driven by expectations of tax cuts, lifting of regs., and lots of money dumped on economy.
Note: Source of weekly economic calendar and good recap of indicators:
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer. Neither Game-On Analysis, LLC, nor George Brooks is registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

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