Will The Stock Market Even Care About Comey's Testimony?
Investing.com | Jun 08, 2017 02:30
by Chaim Siegel of Elazar Advisors, LLC
You have to ask yourself an important question as this stock market develops. Do I need to change the way I’m looking at news, markets and pundit opinion?
If you haven’t noticed, this market has eaten alive and easily digested the riskiest events, only to keep inching higher. That, as readers following us know, is 'great action.' This locomotive plows through risk after risk and just keeps chugging higher.
Former FBI Director James Comey is probably just one more stop on this train ride higher.
h3 /h3 h3 What Can James Comey Say Today?/h3Really, what can James Comey say that hasn’t already come out in the press or in the written testimony released yesterday to the Senate Intelligence Committee? There are always political risks in these types of setups, of course. But can it get much worse than what we already know?
It could, but we lean toward that it won’t. Really, all Mr. Comey can do is confirm the leaks that hit markets on May 17th.
On May 16th The New York Times reported that US President Donald Trump allegedly told Mr. Comey, “I hope you can let this go” as in not follow through on the Michael Flynn investigation. Cries came from across the political world that this was akin to Richard Nixon-style Watergate-level obstruction of justice. If the news were true, the President could be at risk of facing impeachment hearings.
Maybe Mr. Comey can confirm that memo. Maybe he can say more or maybe less in his testimony. The most likely outcome that has to be factored into our thinking is that he confirms that memo.
Markets have to already be pricing that in because that’s the news we have to date.
h3 /h3 h3 Markets Pricing In Comey Confirming The Alleged Memo/h3The news came out May 16th and hit markets hard May 17th. Markets had the single biggest down day all year that day. Here’s the chart of the DJIA that day:
Has anything changed since then? Did much better news follow? We didn’t see any. Nothing came out except maybe President Trump denying that conversation.
What have markets done since? They ripped higher. Here’s the S&P 500 since then:
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Bad news, if you can believe it, is priced in to this up move. People know about this news but markets managed to work higher anyway. Think about that one.
So we ask you, how bad does the news need to be to get markets to move down and stay down? The news would need to be absolutely awful.
h3 So, Does Comey Even Matter To Markets?/h3Markets could go up rain or shine, good news or bad news. There is news, there are stories, then there's what matters to stocks.
Crazy question we know, but could it be that Comey doesn’t matter? Whatever ends up happening in politics will happen in politics and markets could go up anyway. Is that possible?
We think it is. Stock markets are already clearly proving that.
How is that possible? We pointed out material bullish features of this market in last week’s “Is The Stock Market Frothy.”
Rates are low and earnings are picking up. Add to that investor sentiment is far from bullish. Those are great market features. That’s how—and why—markets can continue to charge through “bad news.”
h3 /h3 h3 Conclusion: Trading Comey/h3So if you agree with our thinking, you still have to be mindful of the risk. This is after all a risk event. We’d be in, but leave a little dry powder.
Anything can happen over the next couple of days. As each day passes, Thursday to the close, all day Friday, and then Monday’s open, you will likely know the broad extent of what could have come out.
The news is one thing. But it's how markets react that matters. If they don’t budge and hold, you have great action once again and another confirmation of a bull market.
The market will speak to you and let you know what it wants to do. Put your ears to the train tracks and listen.
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