This came to me from an experienced, very well-respected market technician on U.S. Election night at around 9:00pm. It provides some perspective to what was, for many people, an emotional night.
- Andrew Chowne
Another Buying Opportunity Is Being Presented
BY LEON TUEY
Worldwide, markets are plunging on news that Trump is leading the race to the White House. Such reaction is irrational and unwarranted. Clearly, the left-wing media have convinced investors that if Trump wins, the market will crash and he may even start a Third World War.
Investors should take a deep breath and consider the following:
1. Regardless who wins, it’s Janet Yellen who holds the economic lever. The Fed is an independent body which was created in 1913 to perform all roles monetary. One of its key statutory mandates is “to maintain orderly economic growth and price stability”.
2. As mentioned in recent months, after eight years of monetary stimulation, a synchronous global recovery is now in place. That is a point investors should keep well in mind.
3. Unlike the Democrats’ model of “tax and spend”, Donald Trump is a free-market supply-sider. He has promised to cut taxes and cut government spending which will result in economic growth, rising employment, and increased tax revenue.
4. Investors, big and small, have been selling equities before the election. Consequently, investors are grossly under-invested and have underperformed the S&P. Come January, however, the funds will have to report their performance to their clients. With the year coming to an end, the pressure to window-dress will mount. This sets the stage for a huge year-end melt-up.
5. Moreover, the market is grossly oversold and pessimism is at an extreme; conditions are in place for a huge rally.
6. The secular bull market remains intact and the best is yet to come.
Accordingly, investors should keep their sight on the long-term and do not be distracted by the “noise” and the black headlines. The sell-off should be viewed as an early Christmas present.
November 8, 2016