We’ve been looking forward to some good news as we run through this mini-earnings season. And, right on time, some major financial institutions came through with better than expected reports.

JPMorgan Chase, Wells Fargo, Citigroup and Bank of America all beat expectations so, of course, their shares immediately sold off. This seems a bit counter-intuitive doesn’t it? I mean, what would the reaction have been if they all had come in below expectations? Would the share prices have gone up? Hardly. So, what’s up? Mitch Zacks of Zacks Investment Management offers a possible reason for what appears to be the unreasonableness.

Zacks’ thinking is that while performance is good the expectation of performance is even higher. That can cause disappointment in the investment community. We concur, although the significance of that sort of influence should not be taken as much more than a speed bump. If earnings and profits are advancing shareholders will benefit.

Other than that it has been a rather interesting week. One highlight being the appearance of Facebook CEO Mark Zuckerberg before Congress, and his explanations of his company’s use / misuse of user’s data. We found it to be discomforting that Mr. Zuckerberg seemed to not know a great deal of how things actually work at his company. Our eyebrows were raised even further as we listened to the many questions from lawmakers who know so little about the things they might be constructing legislation about. At the end, it seems Zuck scored more points than the congress critters and the tech sector breathed a collective sigh of relief.

Another feature of the week was the apparent chemical / gas attack in Syria and president Trump’s initial reaction of ‘missiles on the way’. As we often say, markets deplore uncertainty and the Syria thing was/is a massive dose of just that. Fortunately, as the week progressed, the potential for any ‘over-reaction’ became less likely.

Lastly, fears of a trade war with China seem to also be on the wane. The Trump administration is making positive references (rather than antagonistic ones) to that dialogue and yesterday even re-opened the idea of having a, albeit modified, Trans-Pacific Trade agreement. We welcome that but still hold to our thinking that there are a few headwinds for the markets. Most of these will be overcome, but there are a few wild cards yet to be played.

Market Minute 4/13/2018 – Markets Seem to be Ready

 Yes, Markets seem to be ready to resume at least a short-term rally. Technicians read on, the rest of you can quit reading and enjoy your weekend.  All is well.

 The VIX (fear indicator) held around 18.5 this morning and since then has progressed lower.  Current reading is about 17.5. You may recall my comments recently that I’ll sleep better when it gets down below 17. Perhaps we are there, and if not, we are almost there. It means that the cost of buying options is dropping as fear lessens in markets. Along with that, it means we are likely to see less volatility than the market has given us lately. That, most likely, means that some of the money sitting on the sidelines will come back into the market. And money coming in usually means markets will resume their uptrend. 

 We’ve seen support hold above the February lows, a few buy signals on the major indexes, and we will most likely soon be adding equities to our managed portfolios. We continue to project a strong ‘up’ year for equities in the US and around the world. And we also expect that our crystal ball will become clearer over the next week or two. 

 Enjoy your weekend. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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