Sell the fact?

Buy the rumour, sell the fact is a well-worn truism.  The question is whether the Trump tax cuts will fall into this pattern (i.e. the stock market increases while the potential of tax cuts exist, only to fall once the legislation is actually passed) is a good one and there are many arguments for and against.

Overnight, Trump’s tax cuts advanced through the House of Reps only to see US markets pull back – lending some weight to the fears:

European markets were also down:

The USD traded stronger throughout the day before dropping following the vote:

While bond yields jumped at the short end:

and the long:

Oil bucked the trend to edge higher as we saw a larger than expected draw-down in inventories:

Most other markets were relatively quiet.

After the vote, a procedural error was discovered, the House is expected to pass the bill tomorrow and then the Senate to vote shortly after.

I’m leaning toward a “sell the fact” event, but I don’t have high convictions and it would probably be a shortish term buying opportunity.

Damien Klassen is Head of Investments at the Macrobusiness Fund, which is powered by Nucleus Wealth.

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Damien Klassen is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Integrity Private Wealth Pty Ltd, AFSL 436298.

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Damien Klassen

Damien has a wealth of experience across international equities (Schroders), asset allocation (Wilson HTM) and he helped create one of Australia’s largest independent research firms, Aegis Equities. He lectured for over a decade at the Securities Institute, Finsia and Kaplan and spent many of those years as the external Chair for the subject of Industrial Equity Analysis.
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Comments

  1. I think you may be right
    Everybody has got very bullish accross all asset classes
    I think we will get a sell off into new year
    So why is USD falling
    Is this because US debt will increase ??

  2. No, you don’t get it, mate. Sell the fact only applies, as far as the truism goes, in relation to rumour.
    This is not a rumour…. it’s really a “”” done deal “”” – yet the market advances = the market is telling you that you must not sell the fact.
    You’re welcome.

  3. I think there has been a bit of holding off on profit taking from the year until the capital gains tax changes get through in the USA.

  4. USA Rate hikes causing big problems in China. Looks like they are dumping treasuries to stabilise the currency. Major companies struggling to rollover borrowings. That’s what happens when you increase debt in 1 year by the same size of japans entire annual gdp. USA tax cuts have taken everyone’s eyes off the main game.

  5. Well the Governor of the PBOC did warn of a Minsky moment back in October, but everyone is distracted it would seem.