Market Briefing For Friday, July 20
Extended markets - ran into resistance where expected this week; within the Sept. S&P 2810-2820 range. The backdrop in politics was dramatic at times (perhaps more so in-efforts to undermine progress than contribute to harmony among citizens or markets); while the market's 'beat' persisted at its own pace, and eased accordingly based on technicals not testiness.
Business in the U.S. is good; not necessarily great. Corporate guidance in a few earnings reports (like IBM) was solid, but not phenomenal. Whether it's real estate or financials or insurance, there have been 'excuses' for the modest guidance. Few mention the upside exhaustion; games played with buybacks being mostly behind; and the impact a concern about continued progress with reforms (at the moment focused on trade and tariffs) as key to what's going on. It matters; as directly ties into business confidence.
Meanwhile President Trump took the high road (rightly so) versus sloppier efforts to attack the obviously rough performance not only in Helsinki but in subsequent comments. Now, making it clear that nobody is being given to the Russians for interrogation (of course not); that the Fed can make their own decisions whether he agrees or not (of course; and it doesn't matter if Trump thinks he could change that or not; he can't and that's that); and on a Trump-adjusted basis none of these comments are that significant.
What is significant is not the Fed pushing against his implicit remarks; nor will the markets care. The market will care if the AG's public 'indictment' of Russians via a News Conference, at the 'same exact moment' Trump was meeting with Queen Elizabeth (the Monarch not cruise ship) reinforces a suspicion that's the way the Dept. of Justice is conveying 'something more'than meets the eye. So while the markets have ignored the political circus, for the most part; the market would not ignore an actual move to unseat a controversial President.
The market is priced extraordinarily pricey; the protests about Trump very clearly unhappy to see a hawkish Fed is not unusual. During the Vietnam War there was the classic moment when President Johnson summoned a nervous Fed. Chairman Martin to his Texas ranch. While arguing Johnson reportedly slammed the Fed Chairman against the wall. While he pointed out the Fed's independence; he eventually relented to Johnson could have his low-interest continued funding of the war. I doubt media will notice this sentiment when reflecting on the President today; as not unprecedented.
In sum: collusion between central bankers contributed more to the market sustainability, along with buybacks, and of course the post-Election thrusts we looked for 'if' Trump won. All of that has been priced-into the S&P for a few months; while FANG and Oil stocks gave an illusion of strength. Most market internals topped as outlined in late January; with a ragged pattern I called oscillating 'Rinse & Repeat' cycles mostly featured thereafter.
Of course there are unknown ramifications from the political intrigue; and it really doesn't matter how one views the controversial probes; as markets haven't shown concern. But markets will care if this moves to another level of adjudication. It's impossible to quantify; and let's just stand by the belief that it's about the economy; it's about tariffs and trade reform; and it's key to returning 'prosperity', not merely recovery, to the United States. At least until it becomes more than that; which it may not. In which case the market is simply witnessing an ongoing rotational correction in smaller stocks that has prevailed behind the 'glamor' of the FANG and Oil movements; while the big momentum leaders are increasingly vulnerable to shakeouts.
Conclusion: the market's not finished trying to hold up the Averages, but is sufficiently extended to be more concerned yet again.