Suffice to say the U.S. stock market wasn’t expecting to wake up to a Trump victory. The initial response in global markets was harsh overnight (one of the good things about having young kids is I get up throughout the night anyway!). But the U.S. markets have come roaring back from down as much as 5% in pre-market trading. Biotech (up 6%), gold miners (up 5%), financials (up 1.8%) and industrials (up 1.0%) are all doing particularly well in early trading today. And small caps seem to have shrugged off the result, preferring to treat this as any other Wednesday. As you can see below, they bounced off their 200-day moving average on Monday, and are basically flat today.
To be perfectly honest, I’m surprised the market is holding up as well as it is. Given Monday’s relief rally after the FBI cleared Clinton (again) of any criminal charges related to her private email server, it seemed Wall Street was very much banking on her winning the election. It just goes to show, again, how unpredictable the market can be.
I think it’s fair to expect at least a few weeks of higher than normal volatility, regardless of how things go today. Part of that is simply due to the expected change from the status quo (Clinton probably wouldn’t have been that different from Obama). But, equally important is the reality that we don’t have many details on Trump’s policies to work with. We’ve heard him speak out in general terms about infrastructure, trade, immigration, energy, tax reform, healthcare, etc., but it was all very high level, theoretical campaign-speak. Policy implementation is a whole different ballgame.
I’ve steered clear of small caps that would have been heavily influenced by either a Trump or Clinton victory, so I don’t expect to make any moves in our current portfolio based solely on today’s results. That said, I think it’s wise to look at each of our positions through fresh eyes. We have gains to protect, and while I know we’re all fine tolerating some volatility, it makes sense to pull back our holdings a little if the market shows signs of cracking. Accordingly, I’m going through each of our positions and assessing their trading action more closely than I typically do. We also had USA Technologies (USAT) report before the bell today, and I’m working on a detailed update for that. I’ll send it to you as soon as I’m done.
Two Housekeeping Notes
By now you should be aware of Cabot’s new technology infrastructure, and have gone through the process to gain access to our new website. I’ve completed the process on my PC and my iPhone, and it went smoothly. That said, I’ve heard from a few subscribers who couldn’t get last Friday’s Issue. For most that I’ve spoken with, the challenge was that they didn’t realize they had to click the link to view the issue online. If you don’t, all you see is a very short summary of Friday’s new addition, so please click the link!
Thanks for your patience as we work through our technology upgrade.
Lastly, last Friday’s new addition, Marrone Bio (MBII), has been performing extremely well over the last couple of days. While I’m thrilled that it’s up, I also want to remind you that this is a relatively thinly traded stock. Don’t chase it! In the report, I advised building a half position over several days or weeks. While the stock is still incredibly cheap, the recent rise in share price raises the risk of a selloff if next Monday’s earnings report doesn’t impress. That scenario is possible, so please exercise caution. And if you’re buying at this level, buy less than you normally would, and place limit orders well below the current price to try and pick up shares on a spike down.