Here’s the News Investors and Traders Really Have to Watch Out For

We all woke up last Monday to news that former Trump campaign manager Paul Manafort and his associate, Rick Gates, were indicted for money laundering, conspiracy, and lying to investigators.

At right around the same time, we got word that former Trump campaign policy advisor George Papadopoulos had been indicted nearly a month.

This, of course, is all part of the wide-ranging Mueller investigation into the 2016 election – an election that could still rock the highest levels of American politics before it’s all said and done.

The markets… barely registered a blip at the news. The Dow slipped less than 1%, and the Nasdaq even went up to another record. They went on to have a great week.

So, naturally, cable was full of questions like, “Are markets totally immune to news these days?”

The answer: well, a little. It depends.

The “event” you’ve really got to watch out for - and prepare for if you want to make some cash - won’t do much headline-grabbing.

It's Not Politics That Will Get You

Investors are finally catching on to the fact that CEOs, not politicians, are driving growth in this country right now. There’s no better reminder of that than this standout earnings season, which has pushed markets to fresh, new highs.

Now, I’m not downplaying these political news items as non-events.  They can and may have their impact on things regarding our country and what happens on a global scale in other areas, but when it comes to a direct effect on the financial markets, it is financial market news that matters most.

[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

Take the earnings news from Amazon.com Inc. (Nasdaq: AMZN) last Friday, specifically.

Amazon reported earnings per share (EPS) and revenue -  $0.52 per share on revenue of $43.7 billion.

The consensus earnings estimate was $0.18 per share on revenue of $42.0 billion

Of course, Amazon went ballistic, moving above $1,110 for the first time ever.

But even more impressive, and more important, were the all-time highs on the Nasdaq and S&P 500.

You can see the direct impact of Amazon’s news on the markets, in that the markets were trading down the entire week before Team Bezos’ stellar announcement.

The news and subsequent price action on that Friday alone wiped out the losses for the week and had two of the three major indexes back at all-time highs.

Whereas the Manafort, Gates, and Papadopoulos indictments that Monday hardly influenced the markets at all.

The news that did rattle markets on Monday was Merck & Co. (NYSE: MRK) – an important Dow 30 component that had really disappointing earnings.

This is interesting: Here are some of the Marketwatch.com news headlines on Merck, specifically:

  • Merck's stock on track to open at 16-month low.
  • Merck's stock falls 4.2% pre-market after analyst downgrade.
  • Merck stock price target cut to $54 from $73 at SunTrust RH.
  • Merck downgraded to "hold" from "buy" at SunTrust RH.

MRK-chart

In early trading, it was reported by CNBC that Merck was responsible for fully 20 points of the Dow’s decline at that moment.

So, this really goes to show the “news” traders need to watch out for and prepare for. It’s not really about politics.

That said, there are still a few ways the D.C. crowd could upend things in the days and weeks ahead. You’ll want to be ready.

Politicians Could Still “Move the Needle” Soon

Tax cuts. Tax cuts, tax cuts, tax cuts.

The markets don’t want to hear any more about a “gradual” or “phased in by 2022” approach. The markets sagged at almost the exact instant “phased-in tax cuts” hit the airwaves last week.

They’re obviously sensitive to any change in the weather when it comes to tax cuts; that could be bearish if Trump and Congress’ agenda stalls any more.

The markets seem to be happy with Trump’s expected choice of investment banker and Fed Gov. Jerome Powell to helm the U.S. Federal Reserve. We could get “more of the same” – the same soft, slowly-tightening-but-n0t-too-tight policy that’s been extremely bullish for stocks.

But remember, there are three other seats coming up for grabs on the Fed’s Board of Governors. We haven’t seen the main event there yet. Policy could take a turn for the hawkish, and if that happens too fast, get ready for bearish trading while stocks sink.

In any case, be ready to move once it becomes clear how things will shake out. Nimble, rules-based traders will do better than complacent ones or buy-and-hold investors if the news changes.

Free Book for Money Morning Readers – Claim Yours Here

With the secrets you'll find in this book, we've produced 89 chances to double, triple, and even quadruple your money in the past two-and-a-half years – 42 chances this year alone!

Fun fact: You only have to double $500 eleven times to turn it into $1 million.

Click here to learn how you can claim your free copy today.

Follow Tom on Facebook and Twitter.

About the Author

Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.

Read full bio