Average Annualized Return Per Closed Trade: 15.2%
Average Return Per Closed Trade: 14.1%
Average Holding Period: 340 days

On Wednesday, the market had its worst one day decline since the election, as an FBI memo leaked to the press shows that President Trump had asked former FBI director James Comey to drop the investigation into the ties between (former national security advisor) Michael Flynn and Russia. The memo opens the door to the possibility, if the allegation is found to be true, that the president could be charged with obstruction of justice and possibly subject to impeachment.

For an administration that has not been short of controversy from the start, this latest episode finally had a clear and discernible adverse impact on the stock market. While President Trump took office promising via tax cuts and stimulus spending, all the political distraction has seemingly pushed the economic agenda to the back burner. However, with the economy still growing at a tepid, but steady, pace, the stock market has managed to avoid any protracted correction. Provided the major economies, in particular China, avoid any major pitfalls, the stock market should continue to be okay.

On the other hand, the stock market looks more likely to tread water—perhaps with a slight downside bias—than to stage another strong run as it did immediately after the election. The market’s rally this year has been led by a handful of mega-caps, while small-cap stocks have lagged, which suggests that instead of a broad market rally, the strength has been concentrated at the top. When investors are confident, they tend to invest in the small fry, which offer greater upside than the established corporate behemoths.

With stocks trading at historically high levels and with certain potential risks heightening–the North Korean nuclear threat, for example—there’s always the chance that something could go very wrong and pass the point of no return, but we remain optimistic, at least about the North Korean situation, that China will be able to broker some kind of deal to cool the situation down. We suspect a resolution could involve China expanding its One Belt, One Road initiative into North Korea in exchange for the latter reducing its nuclear efforts.      

We are also closely monitoring the commodities market. A price spike, led by oil, would be contractionary event for stocks. But so far that possibility looks contained for the time being.

On the Trump situation, despite the impeachment chatter, we think actual impeachment is still a long shot. The deputy attorney general has appointed former FBI Director Robert Mueller as special counsel to oversee the investigation into ties between the Trump campaign and Russian officials. Mueller is well respected by both sides of the aisle in Washington and will seek to restore credibility to the federal probe into possible Russian tampering.

For a more detailed table of current recommendations as well as information on closed trades, log into our website and click on the ‘Portfolio’ link.