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New York Markets After Hours

May 16, 2017, 1:06 p.m. EDT

Ask Arora: Did Trump reveal secrets to Russia? The impact on stocks, bonds and gold

Don’t panic — and stay focused on what really matters

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By Nigam Arora


Reuters
National Security Advisor H.R. McMaster delivers a statement to reporters at the White House on May 15.

The headline of The Washington Post screamed: “Trump revealed highly classified information to Russian diplomats.”

The White House has denied the allegation as written, and President Trump has defended his actions. (National Security Advisor H.R. McMaster on Tuesday said it’s “ wholly appropriate ” that Trump can share classified information.)

Still, prudent investors are concerned, and they have been asking me questions about stocks, gold, the dollar and bonds.

Many investors seem to think they need to figure out who is right. From the emails I am getting, Trump supporters think Trump is right, and Democrats think The Washington Post is right.

In this column, I will show you how I analyze situations like these.

Apolitical analysis — who is right?

I suggest that investors set aside their politics and objectively look at all the information from both sides. Based only on the information that is public so far, the conclusion should jump out at you. It is clear that The Washington Post is probably right in a nuanced analysis. However, Trump is probably right in the big picture.

What really matters

Investors do not need to get bogged down in the details. What really matters is the impact on tax reform . At best, this is a distraction and has only a mild negative impact on tax reform, which is aimed at boosting the economy. At worst, the GOP may not close ranks behind Trump, causing major problems for tax reform.

Stocks

Let us start by clicking here for the annotated chart of S&P 500 ETF /zigman2/quotes/209901640/composite SPY -4.03% .

The chart shows four stages of the Trump rally. A similar conclusion can be reached by looking at charts of other popular broad index ETFs, such as Nasdaq 100 ETF /zigman2/quotes/208575548/composite QQQ -4.91%  and small-cap ETF /zigman2/quotes/209961116/composite IWM -3.50% .

Based on data at The Arora Report, institutions are more fearful of missing out on a melt up, not on a falling market. This is keeping the upward momentum alive. Momentum is like a fever — it can ignore everything for a long time before it breaks. At present, the fever shows no signs of breaking. However, that can change if Republicans start breaking away from Trump.

Also, keep in mind that there are a large number of investors who trade based on technicals. Pure technicians are the wonderful sort who claim to be always right and are somehow able to justify everything that happens based on technical analysis.

The S&P 500 is at a solid technical resistance around 2,400. If the market turns down, technicians will call it a double top. A double top is a bearish pattern. If the market goes up, technicians will call it a cup-and-handle, which is a bullish pattern. In either case, technicians will pat themselves on the back on being right, and their actions will exaggerate the move.

/zigman2/quotes/209901640/composite
US : U.S.: NYSE Arca
$ 391.86
-16.46 -4.03%
Volume: 114.41M
May 18, 2022 4:00p
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/zigman2/quotes/208575548/composite
US : U.S.: Nasdaq
$ 291.14
-15.03 -4.91%
Volume: 77.40M
May 18, 2022 4:00p
loading...
/zigman2/quotes/209961116/composite
US : U.S.: NYSE Arca
$ 176.24
-6.40 -3.50%
Volume: 34.45M
May 18, 2022 4:00p
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