17 January 2017: Trump correction?

Is this so-called Trump rally on its last legs? Given the language that is used among stock market advisors, one might think so. More and more, the term ‘Trump correction’ can be heard. Mark Eibel, director of client investment strategies at Russell Investments, thinks that the stock market was already overvalued before the elections. In general, stocks do rally between every election and inauguration. So, it is the question if there is a Trump rally at work at all. If we get a correction, which might wipe out most of the gains of the last two months, some could consider it to be a Trump correction. But it might just as well be business as usual: the regular relief of a post-election rally.

white-chapel-logo-smallEarnings season kicked off last Friday, with some big banks reporting, but stocks markets barely moved. The Dow finished essentially where it started (-0.03%), while the S&P 500 gained slightly (+0.18%). The VIX dropped deeper into the elevens at 11.23, but our UVXY ETFs closed higher nevertheless: +0.36%. Return since the start is just below 250%. Return for the year is still well below -10%.
White Chapel did not give a signal at the end of Friday’s session.

Accumulated capital at close of previous trading day

Return since start

Return this year

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Our initial capital was $10,000 at 1 January 2016. Our average Annual Return is 233%.

RS_v05-smallLast night, René watched Bloomberg Surveillance’s coverage of the World Economic Forum‘s annual meeting, which is held in Davos, Switzerland. High on the agenda is the topic of ‘rising inequality and wealth disparity’. According to the World Economic Forum, “Rising income inequality and the polarisation of societies pose a risk to the global economy in 2017 and could result in the rolling back of globalisation unless urgent action is taken.”
In other words, the gap between rich and poor, as well as the angry undercurrent rippling through many countries all over the world, are a threat to the world economy.
It made René wonder: what if the gap between rich and poor, and the frustrations of John & Jane Doe, did not form a threat to the world economy? Would this still be a topic on the agenda in Davos? Would anyone over there feel the urge to “take immediate action”?