Stocks Brush Politics Aside and Rally

The market jumped back into the green on Wednesday following a tense session yesterday full of impeachment talk.

No, the Democrats haven’t pulled back on their impeachment hopes, but the transcript between President Trump and Ukrainian President Zelensky didn’t include a smoking gun.

Of course, we’re just at the beginning of this whole thing.

But the main reason for today’s advances stemmed from the President saying that a trade deal with China could happen sooner than many people think.

The NASDAQ had the best performance on a nice day for the FAANGs. It was up 1.05% (or nearly 84 points) to 8077.38. The S&P advanced 0.62% to 2984.87.

The Dow was the only major index that completely recovered from Tuesday’s selloff, as it climbed 0.61% (or almost 163 points) to 26,970.71.

The trade conflict is never far from the market’s mind, but its been even closer recently after Trump’s tough words for China at the UN yesterday and then the impeachment inquiry.

Investors love the idea that an agreement could come out of nowhere. They’re certainly not going to start betting on it, but there was enough to turn stocks higher today after a few sessions in the red.

So the market is still on pace to gain ground in the historically tough month of September. But with impeachment added onto the plethora of uncertainties, stocks are even more at the mercy of news headlines than before.  

“I am not going to tell you that politics don’t matter – they do… but what tends to happen in that arena is very predictable. A cool head can generally see through most of the actions, having the intestinal fortitude to make some trades based on that is another story,” said Brian Bolan in today’s Home Run Investor.

“Usually the best option is not to trade based on politics – especially the stuff we have seen lately.”

For today at least, the market put politics aside and found a reason to rally for the first time this week. Let's see what happens tomorrow....

Today's Portfolio Highlights:

Large-Cap Trader: This impeachment story is adding even more uncertainty on top of the slowing global growth, high S&P valuation and ongoing trade dispute. John thinks its time for some downside protection, so he initiated three swaps on Wednesday. The portfolio sold the following three names for positive returns:

• Agilent (A, +9%)
• Synnex (SNX, +8.1%)
• CACI Int’l (CACI, +5.3%)

The new buys are all inverse short ETFs for the major indices. The editor wants you to take the proceeds in the sells above and distribute them evenly into these three names:

• Proshares Ultrapro Short NASDAQ (SQQQ)
• Proshares Ultrapro Short S&P500 (SPXU)
• Proshares Ultrapro Short Dow30 (SDOW)

John considers this a “partial, large-cap, index-driven portfolio hedge”. Basically these indices remain at the top of their ranges despite all the uncertainty and are due for a valuation correction, and these inverse short ETFs will make 3X the opposite return of the benchmark. The plan is to hold onto these for just a few weeks and then sell for cash until eventually getting long again. Read the full write-up for a lot more on today’s swaps.

Home Run Investor: This portfolio has been diversifying away from tech for a while now, and Brian continued it today with the addition of E.L.F. Beauty (ELF). This Zacks Rank #1 (Strong Buy) cosmetics company (which stands for eyes, lips, face) did not join fellow cosmetics retailer Ulta in its selloff, which tells the editor that the problem is specific to that company and not the whole space. ELF has beaten the Zacks Consensus Estimate in three out of the last four quarters and has amassed an average surprise of 72% in that time. Read the complete commentary for more on this new addition. 

Marijuana Innovators: The portfolio added some exposure to the growers on Wednesday with the additions of Canopy Growth (CGC) and Tilray (TLRY). CGC offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. TLRY is a pharmaceutical company that develops cannabis-based medicines, drugs, drops and oil products. Learn all about Dave’s reasonings for buying these names in the complete commentary. 

Surprise Trader: "After yesterday’s raucous session, I expected to see some fireworks today. The bots took the market down through yesterday’s lows then unleashed non-stop buy programs that brought a rip-your-face-off rally to the market. All this is happening while the cloud of impeachment looms over Capitol Hill.

"One thing I love about the stock market is, it can go on and do its own thing despite what’s happening in D.C. Drawing parallels to the Clinton impeachment has been something popular in articles recently. The conclusion to draw from those parallels is, the market will be alright regardless.

"Get your popcorn ready for what’s going down on Capitol Hill. We are not 100% sure how the market will react to the proceedings but in the long-run I bet it has very little impact. Short-term, algos are going bananas. That means opportunities are popping up left and right." -- Dave Bartosiak

Until Tomorrow,
Jim Giaquinto

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