I have learned that nothing is certain except for the need to have strong risk management, a lot of cash, the willingness to invest even when the future is unclear, and great people. Jeffrey R. Immelt

At the very same moment Federal Reserve Board Chairman Janet Yellen had a press conference describing its outlook for 2017, President elect Donald Trump was meeting with the most powerful CEO’s in the technology world. Ms. Yellen detailed an outlook where interest rates are forecast to rise not once, not twice, but three times next year.  

Of course, the famous posture of the cover-your-you know what Fed is it all depends on what happens, meaning the data, right? Yes, but also fiscal policy and what might transpire with corporate tax reform and the repatriation of capital. Naturally, those topics fit right in at Trump Tower, where all the participants called the get together ‘constructive.’  Still, investors weren’t necessarily thrilled with the soothing rhetoric of Ms. Yellen as the market sold off hard and finished the week essentially flat. What could be bothering a market which has been on a big run since election day?

First, if we recall way back to our civic government days, the potential for comprehensive tax reform (both corporate and individual rates), repatriation of capital and a large infrastructure agreement will require heavy lifting to get through both houses of Congress. In the room during the tech meeting were the CEO’s of Apple (AAPL), Google (GOOGL), Cisco (CSCO), Microsoft (MSFT), and the CFO from Facebook (FB).  In sum, these companies are sitting on about half a trillion dollars of cash, and a fair amount is held overseas.  

For example, Apple has $230 billion of net cash, with $170 billion of that in long term investments.  A reduction in corporate taxes by 10%, let alone to 15% like the Donald is proposing, yields Apple shareholders an incremental $23 billion in the pocket. You can see why the CEO’s were, um, cooperative, irrespective of their personal feelings about the President elect. There will have to be plenty of wheeling and dealing by Mr. Trump and the Republican leaders in the House and Senate to get Ms. Pelosi and Mr. Schumer to find areas of agreement. Plenty of dollars are at stake, and all investors are watching.  The Art of the Deal, right?

Prospective of a higher interest rate environment, I mentioned last week the air seeping out of the bond bubble. Last week the 10 year treasury closed at 2.464%, this week it continued its ascent by settling at 2.60%. The .14% rise might not seem like much, but in absolute terms it constitutes a 5% increase over the course of a week, and a commensurate (if not greater) loss of the market value of these instruments. Coinciding with this is the weakening of foreign currencies like the Yen and Yuan versus the dollar, not to mention the Euro. Gold got thumped, while oil stayed flat as Goldman decided 50-55$ a barrel during 2017 seems reasonable.  

In technology, Facebook declared its data feeds still aren’t producing accurate numbers, and Yahoo (YHOO) disclosed yet another old security breach, this time for a measly billion users. Some believe Verizon is going to pull out of the Yahoo purchase, but I suspect not. In combination with AOL, Yahoo provides great scale for the movement to automated and programmatic advertising. The deal puts Verizon (VZ) in superior shape to increasingly take on Google and Facebook while gaining content for its massive wireless user base.  Maybe the deal price gets eroded a smidge, but there would be plenty of buyers if Verizon walks.  

Adobe (ADBE) reported a solid quarter as the final three months of the year wind down. It is not hard to imagine the market meandering over the last few weeks with a slightly upward bias. When the year turns, all eyes will be on earnings and the new congress as everyone waits to see if the much talked about changes actually get passed.