Equity Investors Applaud Rate Normalization 11-18-16

Equity Investors continue to vote Loud and Clear in favor of higher rates, including the now near certainty the FED will raise base interest rates at their December meeting approximately 4 weeks from now.

Let’s keep in mind that this will be only the 2nd rate hike since rates went to near zero during the Global Financial Crisis circa 2008/09. This hike will be a full year following their initial hike in December 2015, after which, a handful of regional FED Presidents and FOMC Governors were calling for anywhere from 2 to 4 rate hikes in 2016.

Clearly we will only have one.

Also keep in mind that this is not a classical “Tightening” in FED policy, but merely a step towards “Normalization” in the interest rate structure, that I have always thought would stimulate the climate for new business investment.

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This in addition to early indications of Fresh Fiscal Policy initiatives from the incoming Trump administration, has provided the catalyst for what looks like the early stage of a classic Multiple Expansion Rally in Equity Market Valuations.

This Rally has included significant sector rotation as investors are in the process of reevaluating their overweight and underweight objectives, not just for 2017, but for at least the next 4 years.

Let’s look at a few of the most glaring data points:

The 10 year note has gone from 1.75% to 2.35% in less than 2 weeks. Possibly the most amazing aspect of this move is that volatility has not increased nearly to the extent you would think for a move of this magnitude.

The DJIA; at 18,870 has made 4 fresh all time closing highs during this move.

$INDU Charts

$INDU Daily

equity investors

$INDU Weekly

$INDU Weekly
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The NASDAQ at 5325 hit an intraday all time high earlier today.

The most significant aspect of the rally in the NASDAQ is that it’s rallying at the same time the so called FANG stocks….. FB, AMZN, NFLX, GOOG are selling off as investors book some out-sized gains in those market leaders from the last 2 years or more.

It’s a testament to the strength of the market and the resilience in the NASDAQ that it’s pushing at new highs without the sponsorship of the handful of big momentum stocks that fueled most of the rally in the NASDAQ the last couple years.

Daily and Weekly charts below.

$NASDAQ Charts

$COMP Daily

nasdaq charts 11-18-16

$COMP  Weekly

nasdaq charts 11-18-16 a

The Russell 2000 at 1312 has rallied 13.5% since November 3rd.

Today would be the 12th straight advance for the Russell 2000 if it can stay in positive territory through the end of the day.

The Russell 2000 has gone from an under performer to an over performer in less than 2 weeks, clearly a Yuge Beneficiary of likely pro growth, pro competition fiscal policy initiatives from the incoming Trump Administration.

Daily and Weekly charts below.

$RUSSELL 2000 Charts

$RUSSELL Daily

nasdaq charts 11-18-16

$RUSSELL  Weekly

nasdaq charts 11-18-16 a

The S&P 500 at 2183 is less than 0.05% from posting a fresh all time closing high.  

The slight under performance from the S&P 500 is largely due tocontinued weakness in the oil sector with the commodity struggling to rally out of its recent range in the low to mid $40s.   

Daily and Weekly charts below

$S&P 500 Charts

$S&P 500 Daily

$S&P 500 11-18-16

$S&P 500  Weekly

$S&P 500 11-18-16 A

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