Potential Winners: Companies with a majority of their input costs contained within the U.S; Potentially lower tax rate of 20% on sales and full deduction for input costs; U.S. Exporters: as export revenues are not subject to U.S. tax. Potential Losers:Products, services, and intangibles imported into the U.S.; Automakers, Oil and Gas, to Retailers can be impacted; U.S. Multinationals that have relied on aggressive tax planning to shift earning overseas.
If you can't beat em, join em... at least that seems to be the mantra of long-short hedge fund managers who, after underperforming the S&P consistently over the past 8 years, have decided to ditch their shorts, sending net exposures soaring.
European, Asian stocks fall and U.S. equity-index futures traded mixed on Monday with fresh memories of the Dow Jones rising to under 1 point of 20,000 on Friday. The dollar has rebounded on fresh geopolitical concerns, while the pound extends its decline from Friday and has slide to 10 week lows on a Sunday interview from Theresa May which suggested a "Hard Brexit" may be in the cards.
With all eyes likely on wage growth indications in the subtext of tomorrow's payrolls report (following The Fed Minutes' comments on full employment), Goldman Sachs is forecasting a better-than-expected 0.3% rebound in average hourly earnings (helped by more favorable calendar effects) and a better-than-expected 180k payrolls print (albeit with a small rise in the unemployment rate). However, they are careful to note that any downside can be blamed on "a considerable drop in temperatures."
The Mexican Peso is plunging once again this morning - very close to all-time record lows - as fears spread that Ford's decision yesterday may become the norm following president-elect Trump's tweet that "this is just the beginning."
Expect mechanical pension asset-rebalancing into bonds from stocks (on acct of massive relative performance gap MTD / QTD), most-clearly evidenced by the programmatic ~ half-hour long selling-waves seen in SPX at 9:35am, 11:55am and 3:35pm. Expect this flow to continue through the new year, as market liquidity simply is not deep enough to ‘take it.’
Since 1928, the S&P 500 has averaged a 1.7% gain and traded higher 77% (68 out of 88 years) of the time through this seven-day period, vs. a 0.2% average gain and a 56% success rate during any seven-day period. This year’s “Santa Clock” started December 23rd and ends January 4th.
"Markets don’t have a purpose any more - they just reflect whatever central planners want them to. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable..."
European stocks halted two days of declines, with the Stoxx 600 fractionally in the green and Italy’s bonds climbing after Monte Paschi requested a bailout and Italy pledged to provide support for its other ailing lenders. S&P futures were little changed among extremely thin volumes while Chinese stocks dropped amid concerns on higher borrowing costs.
Credit Suisse agreed to pay $5.28 billion to resolve a U.S. investigation into its business in mortgage-backed securities as officials work through a backlog of crisis-era bank cases. The Swiss lender will pay a $2.48 billion civil penalty and $2.8 billion in relief for homeowners and communities hit by the collapse in home prices, it said in a statement Friday.
The market was waiting for the DOJ to announce the long-awaited settlement with Deutsche Bank today. Instead, it got news of a surprise lawsuit filed by the DOJ which sued Barclays after failing to settle a long-running probe into the UK bank's involvement in pre-crisis mortgage fraud.
According to Credit Suisse, pension funds that rebalance monthly and quarterly would need to sell $38BN in US stocks in coming days to rebalance to prior asset allocation levels, adding the "estimated rotation out of domestic U.S. equities would be one of the largest on record."