The 5-Year-Old Named Wall Street

My youngest son Caleb is 5 years old. And just like any healthy 5-year-old, he’s constantly moving. One of his favorite things to do is to play “tackle” with me on the living room floor.

It’s funny to see how any time he gets scratched or bumped, he wants to immediately stop the game and get a band aid. If I see that it’s not a big deal and I tell him to “shake it off,” he gets upset. He really wants that band aid! (And the sympathy that comes with it.)

Then, within 5 minutes, he’s back to playing tackle again like nothing happened.

That’s exactly what we’re seeing in the market these days when it comes to every tweet, news article, or statement about a new trade tariff…

Investors flip out, worried that we’re going to get an all-out trade war that will sink our economy.

And then next thing you know, the market is rallying again and doing just fine.

(Yes, I just compared Wall Street traders to my 5-year-old son.)

We saw this exact thing happen almost every day this week with the markets opening sharply lower on trade war fears.

But instead of staying low, the market basically spent the rest of the days in recovery mode, making back a lot of the initial losses throughout the day.

It’s as if the market is a 5-year-old shaking off a boo-boo!

Early in the day yesterday, I put some of my own capital to work, buying into the market while prices were lower.

That’s just the smart way to play pullbacks in this market. Because the underlying trends are very strong.

We’ve talked about this over and over. Companies are locking in bigger profits because of the growing economy and because of the tax cuts. They’re hiring more workers and paying them higher wages. Those workers are spending money, which helps corporate profits to rise even more.

And the cycle continues. And it pushes stocks higher.

Hopefully you took advantage of the lower prices yesterday — or earlier in the week — as well. After all, this isn’t a new concept and we’ve seen pullbacks turn higher over and over again this year.

If you missed out, don’t worry. We’ll see plenty of back and forth in the weeks and months ahead.

One area I want to bring your attention to is the oil sector… but not for the reasons you may think.

Take Valero Energy (VLO) for example. This refiner should do well in today’s oil market — where U.S. drillers are working around the clock to meet the growing demand. But the stock has pulled back recently on the eve of the OPEC meeting… which I think is a bit overblown.

That’s because not only does Valero benefit from the rising fuel demand, they also benefit from growing infrastructure spending because they also produce the asphalt commonly used to make roads and roofs.

This is a trend should only accelerate once Trump turns his attention back to America’s crumbling infrastructure.

I’ll have more on this topic in the coming days. But until then, remember, as investors we want to stay ahead of the trends. So while the entire market has their eyes on the trade war, we’ll be pivoting towards the next big rally in infrastructure.

Here’s to growing and protecting your wealth!

Zach Scheidt

Zach Scheidt
Editor, The Daily Edge
TwitterFacebook ❘ Email

The Daily Reckoning