By Scott Martindale
President, Sabrient Systems LLC

Proving to be a better magician than either David Blaine or Criss Angel, Donald Trump pulled a giant rabbit out his hat with his improbable victory to become President-elect of the United States. But even those few prescient souls who predicted a Trump victory couldn’t foresee the immediate market rally. Everyone thought that the market preferred (and had priced in) a Clinton victory. But they were wrong. Small caps in particular have been on a tear.

I said in my previous article on 10/31 that I expected the Russell 2000 small caps to resume their outperformance once the election results had a chance to shake out. Going forward, I expect a greater focus on positive fundamentals to permeate investors’ psyche, leading once again to healthier market breadth, diverse leadership, and higher prices. I expect Trump’s policies, along with a mostly cooperative Republican-controlled Congress, to be mildly inflationary and favorable for business investment and earnings growth, with certain market segments that had been targeted by the Democrats now set to strengthen. This already has become a positive for Sabrient’s fundamentals-based portfolios.

In this periodic update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable ETF trading ideas. Overall, our sector rankings look neutral as adjustments to sell-side forward estimates based on the election are only starting to trickle into our model (even though investors haven’t waited around for them), but the sector rotation model now suggests a bullish stance. Read on....