The Morning After!

Ok…so by now you know what happened…the US elected Donald Trump as the 45^thPresident of the US - now while the overnight reaction on Tuesday evening was very unsettling – S&P futures hit LIMIT DOWN – at one point (around midnight) – suggesting that the world was coming to an end – panic in Asia was ensuing….Asian mkts were the only mkts open at that time – so they were the first to react and the reaction caused tremors around the world.  It seemed to get worse as his lead grew….once Hillary started to catch up – then the futures mkts did begin to rally off the lows – but never turned positive.  Next up were the Europeans – by this time – Asia had suffered losses of 4% – 5% and the mood in Europe was not much better – mkts looked lower on continued ‘sell the news’ reaction.    At 3 pm (est) Trump came out with his family and made his victory speech – sounding much different than the Trump on the campaign trail – insisting that the time was NOW for the country to stop the fighting and come together…..Futures began to rally a bit more – European mkts did open lower and then they found stability – by mid-day – Europeans mkts were making a run into positive territory – but remained cautious until stocks began to trade in the US. 
 
Early action in the US – pre-mkt trading – while not pretty, was not a disaster by any stretch – Futures mkts were pointing about 1 ½% lower on the opening…..a far cry from the down 5%-7% action we had seen just hours before – but the opening bell at the NYSE still had not wrung yet.  Beginning at 9:15 ish – you could feel the angst, brokers/DMM’s on the floor of the exchange got ready to do their dance – trying to assess the damage that had been created overnight.  Now while pre-mkt trading had stocks down 1 ½% - many wondered what would happen when the day ‘officially got started’ by the ringing of the opening bell – Would the mkt collapse? Would cooler heads prevail?  Remember – this was the ugliest, nastiest campaign that we had seen in the history of Presidential elections – tensions were high – while Clinton did win the popular vote by some 200,000 votes – Trump won the electoral college vote - 50% of the nation was devastated – while 50% of the nation was jubilant – How would US investors react now that it was our turn to go to the trough.

As you might have expected – the initial trade was lower – stocks came under pressure – by now – futures were only down about 1%.....suggesting a 20 pt move lower in the S&P on the opening bell – but what would happen right after? Would the bottom fall out or would investors see this as an opportunity? – (God knows we’ve been talking about it for months now…. investors have had plenty of time to consider what they would do under either scenario)….  So here is the funny thing – recall BREXIT – investors did not believe that the UK would vote themselves out – so investors and long term asset managers never really considered the fallout….global mkts plunged over the next 2 days – falling some 5% – 7%  - analysts/strategists calling it a disaster, news articles outlining the downside vs. the potential upside forcing investors to pull back – until investors began to realize that maybe it was NOT the disaster it was being made out to be….mkts did a V spike, investors ran into buy stocks and BOOM!  Mkts are higher today than they were in June pre-BREXIT trading….

So – in the US – long term asset managers and long term investors – made some pre-voting decisions – place buy orders – at DISCOUNTED PRICES - on the book during the day Monday and then wait for the results….So when trading began yesterday and the selling pressure mounted what happened?  The sellers quickly realized that there was DEMAND for US stocks – just below the surface…the BUYERS did not run for the exits….DISASTER AVERTED……. in fact – it was now clear that so many viewed this as an opportunity…..and like clockwork – BOOM!  The sellers backed off a bit and then the buyers got more aggressive – US mkts went from negative to positive within minutes – and the mood changed!  Stocks had a 600 pt swing from low to high as Investors went on a shopping spree – and all was good in the world…..

Investors sold ‘safety’ – Treasures, Gold -  on the bet that Republican (now in complete control) calls for fiscal stimulus will be the KEY to unlocking the door to a brighter and more prosperous US economy – an economy that will leave no one behind….Every sector participated – but Financials, Pharmaceuticals, Industrials, and Tech led the way higher. 

The 10 yr treasury pierced 2% ending the day at 2.07% as the day wore on….investors who had been cautious and defensive were now considering what an expansive fiscal spending program would mean to the US economy.  Beginning by overhauling both the personal and corporate tax code,  bolstering economic activity,  creating real jobs,  and fostering growth forcing inflation higher while supporting higher bond yields in the years to come.   Those who argue that his plan will only deepen the deficit are not considering the additional tax revenues that will be created by ‘repatriation of billions of US dollars’ and the additional taxes collected by the plethora of new jobs created.   I mean could it be any worse than what we have had for the past 8 yrs?  Has our deficit NOT grown out of control under the Obama Administration? Come on! 

For years to come – we will be debating what happened, how did this businessman, non-politician – break the mold?  What was it that caused this groundswell of events?  What was it that he said that caught 50% of Americans to stand up and say ‘Enough is enough”?   What was it that caused the global mindset to shift – Think about BREXIT, think about the possibility that other EU countries could be next to leave the EU, think about the changing Mid East landscape….. These are all case studies for colleges and universities around the country to try and solve…. or at least make sense of…..but for now – President Elect Donald Trump gets to start a new political era, a new chapter in the American Dream Story…. It is time to put aside our differences and come together.

US S&P Futures are continuing to move higher in overnight trading – currently up 18 pts at 2178 just about to kiss the all-time highs of 2190.   In just 48 hrs we have seen global mkts swing by 9% from low to high as global investors are now voting with their dollars sending a message that better days lie ahead…I would look for the mkt to test the all-time highs – possibly today – as the euphoria plays out.  Future FED action will keep the lid on outsized moves for now….but remember – the mindset has changed – portfolio managers are now operating under a different scenario and so the assumptions that were part of the plan are no longer……..There is more to come – cabinet proposals – which will then begin to detail what future policy will look like – this chapter of American history is just beginning – do not come to the conclusion just yet – let it play out as we did 8 yrs ago when another history making election took place…..  

Asian mkts which had gotten hammered got a chance to re-assess the Trump win and have joined the party…. rising overnight as investors there got to re-consider what ‘business friendly pro-growth policy’ looks like.   Japan +6.7%, Hong Kong +1.9%, China +1.37% and ASX + 3.3% - peripheral Asian mkts also along for the ride with Indonesia, Taiwan, South Korea, Malaysia and the Philippines all enjoying better days….  

In Europe – the mkts there continue to celebrate - as investor are pushing those mkts higher by 1.5% or so.  Financials, and basic resource stocks leading way…Insurers higher on the back of better earnings form Aegon.  UBS and Credit Suisse up by more than 6% as a Trump presidency promises to relieve some of the burdensome regulatory reforms hastily put in place after the GFC.  FTSE + 1.1%, CAC 40 + 1.23%, DAX +1.1%, EUROSTOXX +1.3%, SPAIN +1.1% AND ITALY + 1.9%.  Other European mkts join in the fun…SWITZERLAND + 1.1%, NORWAY + 1.25%, SWEDEN + 1.1%, IRELAND +2%, GREECE + 1.3%.  Even POLAND +2.1%, RUSSIA +2%, TURKEY + 1%, and ISRAEL + 1.1% are joining the fun.
 

Penne A La Vodka

I present this recipe today at the request of a MT reader…so Liz – here you go….

This dish is simple to make and only needs a couple of items…. you begin by making the basic pink sauce - For this you need:  Butter, Olive Oil, Spanish Onions, Carrots & Celery - all chopped.  Kitchen ready crushed tomatoes (not puree) s&p and fresh grated Parmegiana cheese.

Begin by melting one stick of butter with a bit of Olive oil.  Now add the chopped onions, celery, & carrots.  Cover and turn heat to medium so as not burn the butter and the veggies.  Keep covered so that they steam and soften...about 20 mins.  Check the carrots to see if they are soft to the touch then you will know you are ready for the next step.
Puree the veggies in a food processor and return to the pot.  Add two 28 oz cans of either - Kitchen ready crushed tomatoes (NOT PUREE) just crushed tomatoes.  (If unavailable - then add 2 - 28 oz cans of plum tomatoes that you crushed in the blender.)   Bring to a boil, then turn heat down to simmer, season with S&P, and cover...stirring occasionally for 20 mins. Turn heat off.   You can make this ahead of time if that is easier and keep it in the fridge – no worries.

When you are ready to use it – remove from the fridge and put it on simmer and heat slowly – Remove the heavy cream from the fridge and allow it to come to room temp.  Also, get yourself about 1 cup of vodka (Tito’s is always a good choice!)

Bring a pot of salted water to a rolling boil. 

Now – once the sauce is nice and hot – add the vodka, turn the heat up and allow the alcohol to burn off – turn the heat to simmer and get ready to add the cream.  Slowly stir the cream into the sauce – adding as much as you like…the more cream you add, the pinker it gets and the richer it gets.  Once blended – turn off the heat and add in 2 handfuls of grated parmigiana cheese – stir to mix. 

By now the water is boiling – add the pasta to the water and stir.  Cook for 8 mins and then strain – reserving a mugful of the pasta water.   Add the pasta directly to the sauté pan and mix well….add some of the pasta water if you need to – if not – don’t. 

Serve immediately in warmed bowls and have extra cheese on the table for your guests.  This is a simple yet delicious dish and some people doll it up by adding fresh frozen peas, or diced prosciutto or even sausage – but all those create a different dish than just the classic Penne a la Vodka! 
 
Buon Appetito.