One thing that is changing the playbook is the new Fed chairperson. Historically, in the first six months of when a new Fed chairperson is in place, there is an average 15.6% pullback in the market. It will be interesting to watch how they will react to a market anomaly by either raising rates or going another route. Also, a lot of Fed governors will be speaking this week which will be something to keep an eye on as they voice their opinions.
The impact of the new tax plan has been mostly positive so far when relating to forward guidance of earnings. We are also seeing confusion on how companies are reporting. It really comes down to how companies are valuing their deferred tax assets and liabilities. Some companies in the same sectors are reporting differently. We are seeing companies report earnings that result in a raise of their value but then ultimately trade back after analysts dig down in to the numbers. These items are contributing to the recent volatility.
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