General Market Commentary – Fri 6 Jan, 2017
Financials have been driving the markets
There have been a number of comments recently about how well financial stocks have been performing during this post-election market rally. Now a chart (below) shows just how big of a roll they played… Also 50% of the rally to new highs in the S&P was thanks to financials!
With all of Trump’s talk about deregulating added to interest rates slowly climbing it is the perfect storm for financial stocks to move higher. We even had Rick Rule on the show last weekend (click here to listen to what rick had to say in segment 2) stating he was looking at community banks. Sometimes it is worthwhile to follow where the money is going but we also need to be aware of the risks.
The largest risk on my mind currently is the huge borrowing that occurred at ultra low rates. When these rates start to rise more and more borrowers will be caught offside. Now this couple possibly be papered over but shocks will be felt in markets and at the political level.
I more or less just wanted to point out that this market rally is not occurring on a broad sense. When we see one sector leading the charge it worries me that a correction is coming – much like at the beginning of 2016 when the FANG stocks drove markets higher.