Capital Trading Group Daily Newsletter 5-19-2017

Stock investors, at least temporarily have moved past the "noise"

Stock investors, at least temporarily have moved past the "noise" coming out of Washington and Brazil, and have been buying up stocks that were recently hit during the mid-week sell-off.

The markets haven’t seen a significant pullback in several months and many insiders believe U.S. stock valuations have become somewhat expensive, especially if president Trump runs into more political complications and can not get his pro-growth strategies implemented.

The S&P 500’s last correction of -5% or more was all the way back in July of 2016. What’s more, Wednesday’s fall of -1.82% is only the second time in 2017 that the index has lost -1% or more.

Wall Street was happy yesterday to hear Treasury Secretary, Steve Mnuchin say that the Trump administration did not support the separation of investment and commercial banks. This brought an obvious sigh of relief and a bit more ease amongst the bigger banks. 

There was also some movement on NAFTA as U.S. Trade Representative Robert Lighthizer told lawmakers that he was triggering a 90-day consultation period with Congress and the American public that would allow talks to begin after August 16th.

The U.S. dollar has recovered a bit from its recent tumble, but is nowhere close to the 13-year high it posted back in early-January following the Trump presidential victory.
Looking ahead to next week, I suspect stock market volatility will increase as "headline activity" could be huge. Not only do we have the highly anticipated Trump budget scheduled to be released early next week, but we also have the most recent Fed meeting minutes coming out on Wednesday, potential testimony by former FBI director James Comey, and an OPEC meeting kicking off on Thursday.

I suspect we will also be digesting new headlines about Russia meddling in the U.S. elections as a special counsel, Robert Mueller, has now been appointed to oversee the Russian investigation being conducted by the Justice Department. Mueller served as FBI director from September 2001 to September 2013. As special counsel, he will not be required to consult with the DOJ and will have greater autonomy than other federal attorneys.

Keep in mind next week will also bring about headlines from Trump's first overseas meeting as the President travels to Israel, Saudi Arabia, Brussels, the Vatican and Sicily. Another event next week that will be highly scrutinized will be Montana’s special House election on Thursday, which Democrats, Republicans, media and investors alike will be using as a gauge of Americans’ current political leanings. Bottom-line, it feels like we need to buckle-up, as a ton of fresh new headlines will be in play next week.

We also have to remind ourselves that traders will be repositioning ahead of an extended three day Memorial Day weekend and end-of-month market.

Finally, we will decidedly end our notes with our reaffirmation of the growing need for alternative strategies. We would like to think that our alternative view on markets is consistent with our preference for alternative risk and alpha driven strategies. Alternatives offer the investor a unique opportunity at non correlated returns and overall risk diversification. We believe combining traditional strategies with an alternative solution gives an investor a well-rounded approach to managing their long term portfolio.

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(800) 238-2610

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With the growing concentration of risk involved in passive index funds, with newly created artificial intelligence led investing and overall market illiquidity in times of market stress, alternatives can offset some of these risks.

It is our goal to keep you abreast of all the growing market risks as well as keep you aligned with potential alternative strategies to combat such risks. We hope you stay the course with us, ask more questions and become accustomed to looking at the markets from the same scope we do. Feel free to point out any inconsistencies, any questions that relate to the topics we talk about or even suggest certain markets that you may want more color upon.
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