Financial Media and Stock Market

Over the last week, Financial News media is talking about how Trump will not be able to keep his promises given current political situation. Hence, continuation of the "Trump Rally," as it has come to be known, is in jeopardy. However, this is not correct and this is my problem with the media. News media needs a story and reports on everything after the fact because that is what majority of their readers can relate to.

They have done the same thing over and over again. Three big examples from 2016 include Brexit, US Elections and Oil crash of early 2016. In case of Brexit and US Elections, media did not have clue of what will happen in the actual vote. Everyone was complacent about status-quo remaining intact and no changes taking place. For example, UK staying in EU, while Hilary winning the White House.

Once both of these predictions turned out to be wrong, they focused on how negative will this development be for the overall stock market because of nationalistic policies, lack of growth and other issues. However, the market proved them wrong every time. And then they cam up with rational behind Trump rally or Post-Brexit stock market rally. These reasons range from additional liquidity by central bankers or business friendly presidency.

Brexit

US Elections

However, if you think about it for a minute, what would have happened had we seen the opposite results in Brexit Vote or US elections?

• Brexit Vote: A vote to stay as part of EU would have also triggered a stock market rally but the rationale would be - it's a relief rally!
• US Elections: A vote for Hilary Clinton would have also triggered a market rally with a rational of policy continuation and lack of uncertainty  

In either case we would have experienced higher prices but different rational. Therefore, financial news media had no idea regarding the cause of the rally and didn't know that the market would rally. They just react to market performance and come-up with justifications. If one had been following the financial media and acting accordingly, they would have lost a lot of money or at least had not participated in the market rally.

And right now, media is so focused on negative aspects of Trump administration that it is missing several opportunities. We discussed some of these opportunities, as part of our 2017 investment themes in February (link).

In order to mitigate this news driven emotional roller-coaster, we developed proprietary portfolios, where investors can invest for longer-term consistent gains without involving emotions due to financial news media. For example, we exited the stock market in Sept 2015 and then entered the market again in July 2016, and have maintained long positions since then.

Following is an overview of the performance. Detailed performance will be shared after end of Q1:

• Conservative: ~7.5%
• Aggressive: ~18.5%

Want to Invest?

At Understand, Survive and Thrive, our goal is to produce consistent, uncorrelated returns using unique analysis techniques, that will enable your portfolio to beat the market over any economic cycle and provide peace of mind. We don't believe in beating SP500 every single month. And therefore, if someone wants to try our strategies just for the short-term, we will suggest that they will be disappointed at some point.

If you are interested in investing, you can register below and we will send an update. Some of the key outputs from the data models used in this strategy are also available through subscription.

Next IPM Model Turn Window

After briefly topping at the last turn date of Feb 28, 2017 (link), market rallied yesterday on Federal Reserve's announcement. 

Market Condition

• During the correction since Feb 28, market did not generate any sell signals. In fact, it generated several buy readings from oversold perspective. 
• At the same time, Sentiment as subsided in the past few weeks, which will provide fuel for this rally to continue. 
• From a government perspective, they are busy with controversies and will not be able to influence the market. 
• Furthermore, Dutch election results were positive for the overall geo-political situation

Hence there are no significant headwinds in front of the stocks right now.

We remain long the stock market because Market Classification Model remains bullish, which turned bullish on stocks in July 2016 and has remained bullish ever since (2017 Investment Performance). However, it is critical to understand potential future turn dates.

According to latest Inflection Point Model re-run, stocks will likely experience turbulence in the first week of April. Following chart shows the IPM model output.

IPM Model turn date is scheduled for April 5 (+/- 4 days). Most likely, this will turn out to be another intermediate top, which will last till majority of companies start reporting their earnings in mid April. However, it will be sufficient enough to make bears out of many longs. 

We will continue to evaluate the market conditions for any sell signals, as we approach this turn date. In the mean time, it seems like this rally could continue for another ~2 weeks.

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