Market Insight 09/27/2016

Last night people around the globe watched the presidential debate in the U.S. As most presidential races have done, this year is no exception. Fed as expected did not raise interest rate and showed no sign for November but signalled that there is a high possibility for a rate hike in December (depending on the outcome of the election)

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On March 1st, Donald Trump won Super Tuesday with a sweep. On May 3rd, Ted Cruz dropped out of the race. On July 18th, RNC went more fluently than one had expected it to do.

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(Market Q, 09/27/2016)

Above is the 1 year chart, market was not really reactive towards Trump candidacy as a Republican nominee.

 

Lifelong goal of Hillary Clinton’s healthcare started politically in 1993. Hillary Clinton is the future of Obamacare. Investors are very catious towards healthcare stocks when it comes to Hillary Clinton. From August, JNJ, the biggest healthcare stock, has been on a downtrend. For past few weeks, JNJ has been hitting 120 moving average.

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(Market Q, 09/27/2016)

The above chart of JNJ tells the whole story.

 

Is it just JNJ, a single healthcare stock, that has been dropping from August. The answer would be No. XLV, one of the biggest health care etfs has been on the same track.

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(Market Q, 09/27/2016)

The question might be asked why have they started to fall from August. It is because both Republican and Democratic conventions were finished at the end of July. Moreover, the actual head to head polls became more real. In other words, before convention, although it was clear that the presidential race was going to be Trump vs Hillary, polls were less thought provokative. People and polls become more real once the specifics are fixed.

 

Investors should approach healthcare stocks with an extreme caution.

Market Insight 09/02/2016

Recently, high growth stocks have been sold off hard by hedge funds. Selling power was significantly huge in recent weeks after the market hitting new high. Even stocks with good earning beats have been suffering from the sell-offs.

Why did the sell-off occur?
– Talks about raising interest rate
– Typical new high sell-off

Before BREXIT, U.S. market was not all negative towards raising interest rate. In other words, the market translated raising rates as a confirmation of recovering U.S economy. However, as Fed officials become more hawkish and raising rates becomes more real day after another, the market fears the uncertainty,
mostly because Fed was never right about the economy for the past years.

Market is simple. More buyers than sellers would increase stock prices. More sellers than buyers would drag stocks down. Dow Jones and Nasdaq have been hitting new highs. A new high is a good position for stockholders to lock in gains.

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(Market Q, 09/02/2016)

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(Market Q, 09/02/2016)

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(Market Q, 09/02/2016)

 

Everyone is saying the same – If Fed raises rate then stocks would fall, then buy at the bottom. However, where is the bottom? Would U.S. market fall as much as what everyone expects it to? Would Fed even raise rate this year?