January has been a month of records, from bitter cold, to Wall Street gains.
With February knocking on the door, the S&P and Dow are set to close out their best start to the year since 1989, with the Nasdaq is poised for its strongest January since 2001.
Naturally, this might get some dreaming about the January effect — the idea that a bullish start to the year means a dazzling performance in the next 11 months. Now there are a few historical holes in that theory, even as the first quarter might be in for a Presidential-cycle boost:
Going back to 1896 …
The first quarter of the third year of the Presidential cycle (so this quarter), is the strongest quarter out of the four-year cycle. pic.twitter.com/VDh00Brnv8
— Ryan Detrick, CMT (@RyanDetrick) January 29, 2019
Obviously, Fed Chairman Jerome Powell’s 180-degree dovish turn or “capitulation”, as some on Wall Street are grumbling, that sparked the best day for the Dow and S&P in nearly two months, hasn’t hurt things.
“More than likely, these better-than-expected numbers from the tech titans, coupled with no more interest rate hikes this year, should see the market make up all of the ground lost in Q4 2018,” the South-African based Vestact investment team told clients in a note.
Vestact is referring to upbeat numbers from Facebook — flying high this morning — and relief seen Wednesday over not-as-horrendous-as-expected Apple results, which in the end helped lift the broader market. But the euphoria seen late Wednesday has definitely faded a bit.
Our call of the day suggests we are likely standing on the edge, or in the vicinity, of a blowout rally.
“If President Trump manages to pull off a deal with China, that’s gonna be it. You can imagine what this market’s going to do. Even if we get a bad deal with China, the market doesn’t care, the market is completely disconnected from the economy,” trader Gregory Mannarino, who refers to himself as the “The Robin Hood of Wall Street,” told clients on his blog.
A trade deal has eluded the market for a while, and it is hard to say when that will come through, though it could be one of the last carrots to dangle in front of the market to keep stocks buoyant. Talks are set to continue Thursday and at least according to POTUS, it’s all going swimmingly well:
China’s top trade negotiators are in the U.S. meeting with our representatives. Meetings are going well with good intent and spirit on both sides. China does not want an increase in Tariffs and feels they will do much better if they make a deal. They are correct. I will be……
— Donald J. Trump (@realDonaldTrump) January 31, 2019
But what’s good for the bulls is also good for the bears? Slope of Hope blogger Time Knight says the bears have some hope to cling too because “getting the Fed out of the way was key,” and now the Powell “put” is built in and the man himself can “only surrender once.” For those unfamiliar, a put is an option that gives the caller the right, but not the obligation, to sell an asset at a set price by a certain time.
“Paradoxically, the best thing that could possibly happen for the bears at this point would be some kind of definitive, positive announcement on the U.S./China trade situation. That’s really the only ‘overhang’ left. Get some big splashy announcement from that, and the market will quickly tell you what its peak price is,” he writes.
Knight says following POTUS’s Dec. 24 advice to pile into stocks, was a winning move. “I think that now, many thousands of points higher, it ain’t such a bright idea. And yet people are still piling in. Some people are JUST piling in.”
The market
Contents
With such a heavy earnings schedule today, the setup is somewhat cautious, with Dow
and S&P 500
futures, but Nasdaq
futures stronger as Facebook climbs. Wednesday’s Fed-fueled action saw the best close in nearly two months for the Dow
S&P 500
and Nasdaq
is racing higher, the dollar
is taking a breath and crude-oil futures
are struggling for gains.
Europe stocks
are mixed, and Asia
had a mostly gangbusters session. Investors saw slightly improved China factory activity data, though the domestic demand picture is still soft.
The chart
Tech stocks are definitely grabbing a good chunk of the limelight lately, but our chart of the day from Paul Theron, Vestact’s CEO of equities, builds the case for investors to pay attention to some other highfliers:
The above chart shows the reach of Visa
which reported forecast beating revenue and earnings late Wednesday. He said shares were trading at $15 when they first advised clients to buy with this advice: “We continue to believe that more payments will be done electronically over the coming years, and those that own the highways will collect the toll fees.”
Fast forward a few decades and shares are 10-fold higher, with Visa aiming for $11 trillion in total transactions for 2019, from $4.8 trillion in 2010.
Theron says many retail transactions are still being done with cash, but phone apps and debit and credit cards will continue to replace those, with Visa, Mastercard or China UnionPay among the most popular. “This one is a high conviction buy for all portfolios. It’s our most widely held stock, both by value and number of clients,” he said.
$V beats on the top and bottom line because credit is the only source of growth in the world. Shares up $1-2
— ForexLive (@ForexLive) January 30, 2019
The buzz
Privacy scandals didn’t dent Facebook’s
quarter, and shares are rocketing higher on a surprise a record profit late Wednesday. Microsoft
is down on revenue miss, and a profit beat is lifting Qualcomm
Tesla
is taking a hit from an earnings miss and news the CFO is leaving.
Wall Street was digesting reports from DowDuPont
Northrop
GE
with others, including Altria
Blue Apron
UPS
Yum China
and Mastercard
set for release.
After the close, Amazon
is the big name (preview here).
The economy
A day ahead of jobs data, we’ll get weekly jobless claims, along with delayed employment cost index, personal income and consumer spending, core inflation, followed by the Chicago purchasing managers index and new home sales (from November).
The quote
Getty Images
“A great deal of America’s economic progress has resulted from people’s aspiration to make more and live better. Take that away and what do we have? The people at the bottom won’t have as many at the top to resent.” — That was Oaktree Capital co-chairman Howard Marks, in his latest memo to investors where he frets over “negative sentiment toward capitalism,” and passes comment on fiesty New York Rep. Alexandria Ocasio-Cortez for one.
Read: Newcomers? Congress is still all about longtimers — and one party has more of them
Random reads
Summer 2021: That’s when we’ll get another “Batman,” movie, but count Ben Affleck out
Evidence of 2,000-year old first beer in the U.K. found on a roadside
A 984-foot cavity is growing under Antarctica. Naturally, not a good thing.
Surprising no one, a bunch of non-vaccinated kids got the measles
The polar vortex has already claimed lives and freezing temps are now headed for NYC
Meanwhile, you’ll tell your grandkids about surviving that NY snow squall Wednesday afternoon
Time lapse of the most intense snow squall I’ve ever seen crossing Hudson River into Manhattan. #ABC7NY #nyc #nywx #njwx #ctwx #snowsquall #snow pic.twitter.com/fw76ilr1Vb
— Jeff Smith (@JeffSmithABC7) January 30, 2019
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