Good Morning,

 

As the calls for the “Trump Rally Over” fade into the dark shadows – only to be replaced by new media hype – markets continue their trek.  As much as I would like to think there are always excellent things to report and much new information to review, often there is not.  This is one of those periods.

 

The healthcare issue taking the attention of many for the last several weeks has been hyped beyond all reason.  Many in the media forgot, I presume, that it It took Obama nearly two years to cram this down everyone’s throat to start.  Ending it will take longer than a few weeks.  Were I a political player, I might suggest letting it die first is the better deal.  Only then will the masses understand the difference between media hype, political meanderings and real-life facts.  On to taxes and regulations which is likely more important to the country for now.

 

How Many “Red” Days?

 

Often you read here that our view is the crowd’s “bullishness” is only skin deep.  Scratch on that confidence a little bit and you will quickly see their fangs.   While we were well off the lows yesterday, it was heralded in negatively as “the 9th day iin a row for a down close in the DOW.”

 

Keep in mind, we are all of about 3% or so off the most recent highs.  The point?  When you get a string of down closes and a very shallow setback (3% to 7%), they often appear later as just resting points.  Politics continue to muddy the water.  Chatter about Q1 earnings season will hit the airwaves in the next two weeks and summer will be here before you know it.

 

Promise yourself the annual calls for “sell in May and go away” will be the media reason the moment any red ink is seen after about April 20.  Alas, this is normal for this tiime of year – it’s the calendar not the economy – or the end of the world.

 

Other times?

 

We have had 9 days down in a row – not many – but some.  Indeed, other than the 2015 event noted in the list below – it was the 70’s the last time we saw it.  In other words – don’t fret the small stuff:

Required Disclaimers on all videos and content

Note the dates:  and this – allowing for the event in 2015 which turned around nicely, a large percentage of people working on Wall Street today weren’t even alive the last time the DJIA had a nine-day losing streak.

 

The table above lists the ten prior nine-day losing streaks that the DJIA has seen in its history going back to 1896.  The longest losing streak the DJIA has ever had was fourteen trading days, which was back in 1941.

 

Like the current period, the DJIA’s decline during the initial nine days back then was very muted.  Interestingly enough, of the ten prior streaks where the DJIA was down for nine straight days, more often than not (six times) it went down for a tenth day as well, and half of the time (five times) it went on to decline for at least an eleventh day.

 

Looking at returns going forward, the DJIA’s average one-week change following the ninth straight day of losses has been a gain of 0.2% (median: -0.2%), while the average one-month return has been a gain of 2.0% (median: +1.6%).   Like a said – it’s not a sign of lighting the world on fire – more like just a resting point.

 

Pray for more of the same for a bit.

 

Investor Sentiment?

 

Here is a current snapshot of the AAII Bullish readings.  As we have previously covered, they remain paltry for a market like the one we face today and continue to show the underlying concerns remain heavy in the minds of many.

 

It will be interesting to see what unfolds later this week when the latest data are released given the 9-day chatter:

Jobs and Household Finance

 

As is too often the case, the noise over the airwaves overlooks the more important elements – jobs and household finances.

 

Both are very healthy – no matter what the pundits scare you with online.

 

In fact, be more concerned about inflationary pressure coming to boil given the vast number of jobs open and the small cadre ready to fill them.  As our economy’s pace quickens over the next 18 months, we may very well find our next feared event is we have run out of workers.   You see – robots are not a completely terrible idea – and can serve a very positive purpose.

 

Let’s take a look:

Scott always lays out some solid charts and these three above are very helpful to the cause.

 

The first charts covers a comparison of unemployment claims to total payrolls. Here we see a pretty remarkable event unfolding:  We are staring at data suggesting that the current chances of a worker getting laid off are as low as they have ever been, and by a very significant margin.  Also note the upturn which is a lead indicator before every previous recession.  We are not even close.

 

The second chart shows that when measured as a % of disposable income, financial burdens have not been this low for over 30+ years!

 

Note importantly, that the consumer debt line includes student loans, which now total over $1 trillion and continue to grow.  It is the only fly in the ointment if you will thanks to the previous administration’s willingness to grant student loans with little or no regard for a student’s ability to pay.  Sound familiar?

 

Last for now, in the third chart above, you can readily see that household debt has dropped by about one-third since the 2008 recession – and is now back to levels not seen since the early 80’s!

 

This is excellent new all around – and too overlooked.  Long-term investors will look back on this years from now and recognize that this is the same scenario we saw the last time a major shift was unfolding in generational economic powers.

 

This all likely explains why consumer confidence is hitting highs not seen in years.