It’s nobody’s secret that money moves the markets. True also is that removing, or reducing, uncertainty can encourage the money to get moving.

This week has seen a confluence of events that set up a battle of things unknown versus things finally (if only partially) known. It seems that ‘known’ works better.

All three of the U.S. major indexes set new record highs this week; something that would seem unlikely, given that it is co-incident with America looking at only its third presidential impeachment in history. The mavens of Wall Street clearly had their eyes elsewhere.

Probably the most significant financial event of the week was the signing of the ‘Phase One’ trade agreement with China. After all, it was the ‘on-again’ / ‘off-again’ of that deal that dogged most of the market’s bearish side throughout 2019.  Finally, it came. And with a cherry on top to boot: China has agreed to buy 200 Billion USD worth of stuff to help get things rolling.

Next up was the passing of the USMCA, the new version of NAFTA. Canada’s Trudeau was happy.  Mexico was happy, Trump was happy. The markets were happy and many Americans were happy to discover that Trump doesn’t really hate Mexicans after all.

So, what about the impeachment? Why no negative reaction from the markets? In the world of ‘Unknowns’, this is a pretty substantial one. Truth be told, there is not a lot of conviction in the idea of conviction. Of course, as we frequently point out, black swans can and do appear. Accordingly, we’re staying on our toes.

Ron’s Market Minute — Another Day, Another Record (actually 3 or more) in the Markets 

After a big move up in the stock market, investors tend to get acrophobia (fear of heights).

But the importance of market swings in both directions is usually exaggerated. There is no doubt that the path forward will be complicated, but we welcome the challenge.  We are in the monitoring phase of this upward market bounce- tweaking as always, and staying with the stronger parts of the markets.  In some cases it’s a difficult task to decide which areas are stronger. 

So here’s some trivia.  The SPY (pretty similar to the S&P500 Index*) is pushing to another new high, sporting a gain of 1.81% for the first two weeks of trading.  This is a very strong start to a year, although it’s only the 4th strongest start out of the past 8 years.  Interesting comparison – 2019 started the first two weeks with a gain of 4.12% (!!!).  So the first two weeks are good but not exceptional.  I note, however that I would apply the term ‘exceptional’ to the market’s advance since October.  On the other hand a fast start as in 2018 is not always a good indicator of the year that follows.  After the peak in Jan. 2018 the markets traded into negative areas throughout the rest of the year.  (Could have had something to do with the circus in the trade arena of course.) 

Today things could not be more different (in the trade arena) in my opinion.  Phase 1 might be a very flawed agreement that only marks a truce in a long and continuing dispute, but it may be a truce that lasts through the election cycle.

Many markets look stretched, but this does not necessarily require a large pullback.  We are not predicting a race to the moon, but the support in many markets at the 50 day moving average is pretty strong.  IN other words, should we see a pullback, it will likely be muted. 

And so begins another interesting year.  We continue to be optimistic, and expect returns generally in line with most election years (around market averages- which are pretty decent.)

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.