They voted for Donald Trump in the US election, back in November last year. John & Jane Doe believed in his pep talk when the Donald promised them that America would be great again. That he would bring their jobs back home. And that everyone would get a tax cut. After eight years of waiting in vain for a slice of the cake of economic growth (see ‘René’s Reflections @ Friday’ of 4 November 2016), they had become disillusioned and put all their hopes on Trump. Voting for him as President of the United States was a no-brainer for them. They not only hoped, but also strongly believed that if given the chance, he would deliver.
Fast forward nine months. We are looking at a more than stellar July jobs report. Payroll jobs rose by a quarter of a million — much higher than anticipated — and the unemployment rate was unchanged at 4.9%. And John & Jane Doe? They look into their wallets and see nothing has changed. The longer it takes before job growth reaches their wallets (and/or the Donald delivers on his many other campaign promises), the more likely it becomes that history will repeat itself.
On Friday, all major US indices posted gains, following a much better-than-expected July payrolls report, and the unemployment rate retouching a 16-year low. The Dow gained for the ninth day in a row (+0.30%) and closed at an all-time high of 22,092.81 points. The S&P 500 went up slightly by 0.19%. The NASDAQ added 0.18%, not enough to prevent it from closing the trading week with a small loss (-0.36%). The S&P 500 ended the week virtually flat with a minute gain of 0.19%. The Dow did much better for the week (mostly thanks to Apple): +1.2%. Volatility followed a zigzag course on Friday, with the VIX meandering around 10 points. At the close of the session, it settled just above single digits at 10.03 points, 4% lower than the close of the previous session. Investors appear indestructibly optimistic. XIV ETNs profited mildly from this ease in volatility: +0.50%. UVXY ETFs lost 1%.
All our models were in possession of XIV ETNs Friday. Danny Daredevil, who sold his UVXY ETFs at the beginning of the session, was faced with a loss of just over 10% on this trade. His newly acquired XIV ETNs closed 0.3% lower than the price he paid at the session’s open. As a result, Danny‘s RSS dropped to 192%. Adventurous Anny also bought XIV ETNs and made a small loss (0.3%) during the day. Her RSS is now back at 32%. Solid Suzy and Lazy Larry already had XIV ETNs (since 6 March) in possession. XIV ETNs closed 0.5% higher than Thursday’s close, resulting in Suzy‘s and Larry‘s RSS to rise above 41%.
None of our models gave a trading signal at the end of Friday’s session.
RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return
The Chapel Family – Episode 9