Taking Stock

By Tony Crowell
By Tony Crowell

After the tumult over the past two weeks, the condensed Thanksgiving trading week provides a useful pause. The financial media predicted that a victory by Mr. Trump would ignite a fearsome slump in the stock market. To the contrary, investors caught their breath and decided that the economy still had much to offer, driving all the major stock market averages to record highs.

Stocks in solid companies, particularly in the technology, finance, and industrial sectors led. Even the lagging medical group showed strength. These have been the focus of my recommendations and remind me of Oprah Winfrey’s saying, “Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.

Stock investors can be grateful for the current wave of enthusiasm, which recalls the rally after President Reagan’s election in 1980. The new euphoria has similar expectations of tax cuts and increasing spending. There has been broad agreement on infrastructure spending, a potential boon to both economic and job growth.

The prospective effects of fiscal incentives pushed interest rates up in advance of the forthcoming Federal Reserve. Higher rates strengthened the dollar, which is almost again equal to the Euro, currently at $1.06. When introduced in 1999, the Euro traded below the dollar until 2002, rising to $1.60 as the U.S. struggled with the financial crisis in 2008.

Two weeks is a short period in economic cycles but the change in direction after two years of stagnation is quite encouraging. The market rally during President Obama’s first term exceeded 84% on the S&P 500. That was fueled by central banks worldwide flooding liquidity into the markets to aid recovery from the Financial Crisis. These banks are now retreating toward tighter money policies and a continuing rally will need both tax cuts and government spending rather than relying on the Fed.

Oil prices may become an additional stimulus. Previously raising concerns about spurring inflation, they are now viewed as incentives for some governments, including the U.S., to spend more to boost their economies.

Consumer spending will be an important indicator and we shall soon receive initial reports of holiday spending. Forecasts by the National Retail Foundation are often wrong and investors should wait for actual sales reports. Online sales are already strong and getting stronger, thus Amazon (AMZN-$784) is becoming an increasingly reliable asset for growth stock investors.

Prospective growing construction activity will boost Waste Management (WM-$69), which gets substantial revenues from construction sites. Recent new buy Vulcan Materials (VMC-$128) already is up 20 points with room to run. Acuity Brands (AYI-$253), the innovative leader in advanced LED lighting, recently announced record sales and earnings. Its next quarter will probably be its fifteenth straight quarter will double-digit sales growth.

Prospective easing regulations will aid larger financial institutions. JP Morgan Chase (JPM-$78) and Morgan Stanley (MS-$40) are my favorites. Both yield 2% and should expect less restraint on dividend policies. Visa (V-$79) will also benefit.

Nvidia (NVDA-$93) is a leader in several platforms and its diversified revenue stream differentiates it from its competition. Broadcom (AVGO-$177) provides multiple applications for wired infrastructure, wireless communications and enterprise storage. I am continuing to add to positions in both companies.

Those fortunate enough to be able to invest in U.S. stocks have many reasons to celebrate Thanksgiving. A very fortunate investor, Bill Gates, has this recommendation. “You may have heard of Black Friday and Cyber Monday. There’s another day you might want to know about: Giving Tuesday. The idea is pretty straightforward. On the Tuesday after Thanksgiving, shoppers take a break from their gift-buying and donate what they can to charity.”


Tony Crowell manages stock portfolios for individuals and their trust and retirement accounts with CROWELL•ROBERTS Investment Counsel, a registered investment advisor in Laguna Beach since 1995. [email protected] 949.494.1376/800.697.2622


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