Last month I mentioned I was doing well in my NCAA basketball tournament brackets. Unfortunately (for me) North Carolina overcame their heartbreaking loss last year and won it all this year. If North Carolina had lost to either Oregon or Gonzaga, I would have won one of the brackets. Now it’s time to gear up for the hockey play-offs and Kentucky Derby.
I expect the next few months to be very volatile for the markets as President Trump continues to make things interesting. As you’re aware, the U.S. dropped its largest non-nuclear bomb in Afghanistan and tensions flared between the U.S. and Russia. President Trump also reversed course saying he no longer sees China as a currency manipulator.
The above news led to the 10-year U.S treasury yield falling about two basis points to 2.22 percent as investors looked for safety.
After two rate hikes the bond market is now surprisingly lower rather than higher, suggesting weakness to come in the stock market. This is interesting to note as the bond market is often, smarter than the stock market in predicting medium to longer-term expectations for stocks.
The biggest sector that I still see some potential value in is healthcare. I’m holding off on making any big moves at this time because President Trump continues to make healthcare reform a priority. While I feel the price moves to the downside have been overdone in some healthcare stocks, it’s a bit premature to jump in until the healthcare agenda is further sorted out.
After the healthcare reform is addressed, Congress will tackle corporate tax reform. If the corporate tax reform is passed in its expected format, U.S. companies could repatriate as much as $1 trillion back to the United States. This would lead to improved corporate earnings and spending which would lift the economy. While this might lead to a quick uptick in stock prices, most of the tax reform is already priced in to the market.