2 Ways to Profit from the “Uncertainty President”
The Chaos Candidate has become the Uncertainty President, legendary financial commentator Barry Ritholtz declares.
“Our collective wishful thinking assumed he would pivot to the middle, to being presidential, to predictable professionalism,” Ritholtz says. “None of that has happened, and markets have been somewhat put off by the president’s erratic, even bizarre, behavior. The sort of stability that is good for business has been notably absent.”
It’s safe to say a few pundits are spooked after the first couple of weeks of the Trump administration. Others are downright terrified. Everyone’s clamoring to be the first to call the end of the post-election rally. Adding to the Trump drama, many of these same folks cite high valuations and even higher investor complacency as suitable reasons for a dramatic sell-off.
Let’s face facts: the wall of worry doesn’t get much higher than this.
Meanwhile, the major averages remain frozen in suspended animation just shy of their all-time highs.
“A former TV star as U.S. president doesn’t seem to have injected markets with much of a ‘fear factor,’” Bloomberg declares. “But digging beneath the surface of an eight-year bull run exposes subtle signs that hint at an uneasy optimism.”
The one thing folks can agree on is that uncertainty is running high these days. Bloomberg actually went to the trouble of counting the use of the word “uncertainty” in the news and has determined it’s reached a record…
Of course, today’s world is no more uncertain than yesterday’s. Even with the Uncertainty President in the Oval Office, we have no better grasp of the future than we did during the last administration. Everyone’s staring at the same Magic 8-Ball – and the same response keeps appearing: Reply hazy try again…
What the scared scrum of news junkies fails to mention is that you don’t need to possess any certainty whatsoever to select winning trades. Price will tell you everything you need to know.
While volatility sits near historical lows and the major averages remain in a tight range, any stock picker worth his salt can dig up the stocks and sectors that are thriving in this new era of uncertainty.
Semiconductors have slapped around the rest of the market since they fought off their lows and broke out to new 2016 highs all the way back in June. Now they’re continuing their dominance as the tech sector comes back into focus.
The VanEck Vectors Semiconductor ETF (NYSE:SMH) boasts 12-month gains of almost 60% compared to a 22% gain in the S&P 500 over the same timeframe. The ETF registered new all-time highs yesterday.
Semiconductors aren’t the only tech names slashing higher. The FANGs—Facebook, Amazon, Netflix, Google— are back and better than ever. Amazon took a 3% hit after failing to beat earnings estimates. But the stock remains less than 5% from its all-time highs. Meanwhile, Netflix clocked new highs yesterday. The streaming service is up nearly 50% over the past six months.
Remember—these big tech companies weren’t even the dominant market movers during the early stages of the post-election melt up. In fact, these stocks received the biggest beating as folks piled into materials and banks.
Continued strong performance from semis and big tech is not a bearish development for the markets. We can complain about politics and uncertainty until we turn blue.
Right now, the market’s most popular growth stocks are signaling there’s strong buying happening under the surface of the major averages despite the current hysterics in the financial press. Uncertainty can run as high as it pleases. It’s just another brick in the wall…