After Surviving Last Week, the Stock Market Is as Resilient as Ever

  • Global equities drift higher day after Trump press conference
  • Rebounds are actually getting faster, based on recent moves

Why Schwab's Sonders Is 'a Bit Cautious' on Stocks

Investors have a way of adapting. And once they’ve adapted to the threat of a nuclear war with North Korea, getting them riled up about other stuff is apt to get harder.

At least, that’s how it played out Wednesday, as the conflagration over President Donald Trump’s comments on the Virginia protests caused only a minor ripple in the equity market. The S&P 500 Index ended higher and the CBOE Volatility Index fell, with only a brief interruption as CEOs abandoned the president’s business councils.

The market’s processing speed is quickening. Looking at times the S&P 500 took one-day plunges of between 1 percent to 3 percent in the last few years, the rebound since Thursday ranks among the fastest. The S&P 500 erased gains that reached 0.4 percent in the wake of the CEO rebuke before rebounding to close higher by 0.1 percent -- in the end all but five points of Thursday’s 36-point tumble have been retraced.

“We spent much of last week trying to talk clients and even some advisers out of selling all their stocks, and yet, now, our in-boxes are flooded with inquiries on what to buy,” Andrew Adams, a strategist at Raymond James Financial Inc. in St. Petersburg, Florida, wrote in a note. “The real money is made in the stock market by staying mostly invested.”

To Adams, the determinant of the bull market’s stamina is earnings, not politics, and they show few signs of fading. Profits in the S&P 500 just posted two straight quarters of double-digit growth for the first time since 2011. While valuations stand at levels not seen since the dot-com era, stocks are cheap relative to bonds with yields hovering near record lows. 

Trump is facing growing condemnation inside his own party for his explosive remarks at a news conference Tuesday. The president criticized “alt-left” counter-protesters as “very, very violent.” Facing them, he said, "were people protesting very quietly the taking down the statue of Robert E. Lee. I am sure in that group there were some bad ones."

It’s not that the market approves of what’s going on. It’s just that it doesn’t care, said Paul Zemsky of Voya Investment Management LLC.

“Unless we see concrete policy out of the administration, good or bad, the market isn’t really going to react to it because they’ve been fooled so many times,” said Zemsky, who helps oversee $213 billion at the New York-based firm. “When the fundamentals are good, staying out of the market is risky.’’

That was on display last week, when about $500 billion was erased from global share prices over three days after Trump said North Korea’s nuclear threat to the U.S. will be “met with fire and fury.” Most of that damage has been repaired, with the MSCI All-Country World Index sitting two points from its closing level on Aug. 4.

There’s also evidence individual stocks are getting less sensitive to politics too -- or at least to the president’s Twitter handle. Amazon.com Inc. was down a scant 0.4 percent Wednesday, hours after Trump tweeted that the company is hurting other retailers and killing industry jobs across the U.S.

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