(New York)

Yesterday’s relief rally has already turned sour. Earnings out of Amazon and Google greatly disappointed the market and shot the Nasdaq down as far as 3% in premarket trading. However, despite all the trouble, Wells Fargo says it is the best time to buy stocks since before Trump’s presidency. According to the head of the Wells Fargo Investment Institute, “We believe that this isn’t the end of the cycle or the bull market, and we favor deploying cash now—or even allocating incrementally over the coming days and weeks”, continuing “Current conditions have the potential to create some of the best entry points into equity markets since the November 2016 elections”. That said, Wells Fargo acknowledges that we are at the end of the “easy period” of low volatility and an accommodative Fed.

FINSUM: It is anybody’s guess as to whether this view is right, but we reluctantly tend to agree that stocks are probably going to recover from this bout of volatility sooner rather than later.

(Washington)

For the most part, President Trump has been seen as quite positive for markets. The big rally in his first year cemented that idea, and for most of this year, stocks were in good shape. However, here is an interesting fact—equity valuations are now lower than when he took office. As the media puts it, “the Trump Bump is turning into the Trump discount”.

FINSUM: Two thoughts occur here. The first is that a big reason why valuations have fallen is because earnings are so good, and a lot of that has to do with the Republican-led tax package, so it is not fair to turn that into a negative. Secondly, most of the market trouble stems from the trade war, so it is more an isolated case of policy than a broad effect. In fact, what could be better than good share appreciation without a rise in valuations? It is exactly what you are looking for as an investor—something that earns well but doesn’t look increasingly overpriced.

(Washington)

Markets are currently experiencing a great deal of volatility. The Nasdaq is in a correction and the Dow and S&P 500 have shed all their gains for the year. One of the big reasons why is investors’ fear of rising rates. With that in mind, many are hoping the central bank will save markets via the so-called “Fed put”, or the idea that if things get bad enough, the Fed will come in as a backstop with some sort of measure to boost asset prices. However, the truth is that Wall Street says we are not nearly deep enough into a correction/bear market for the Fed to take any sort of accommodative action.

FINSUM: Powell is much more hawkish than Yellen or Bernanke and we have no illusions that there is going to be any sort of supportive measure in the near term. We expect hikes to continue.