We are just days away from a new U.S. administration taking the reins of power. Tensions have run high with bitterness and distrust from all quarters. The Events in Washington DC last week threaten stability to the transition of power. The current environment is potentially explosive, and security is being beefed up on a large scale. The events have riled and ruled the short-term action. The tape is whip-sawing investors and traders alike. There is a rule we’ve made for ourselves over a 36-year career in trading and investing and that is: Never trade personal politics as it clouds one's judgment, introduces unnecessary emotions, and takes the focus off the business of the day: trading! Our job is to spot opportunities in short term actionable moves & longer thematic trends. As Traders, we must keep our eye on the prize and trade like mercenaries-self-hired to find profits. Focus leads to success, and the noise of the day usually distracts. It is best to get into a routine. Before the market open (BMO) we look to see what, the futures have done overnight. We then look for corporate & event news that will affect trading in the stocks and sectors that we follow, earnings, analyst calls, regulatory issues, legal notices, FDA results, etc. We regularly check & review sector performance to determine inflection points for the coming session and week ahead. We review seasonal trading opportunities that have a high probability of recurring. We look for pattern/price and time setups where we deem risk and reward to be in our favor.
 
In the next few days to weeks, the legislation that will emerge will create some new winners and losers. We saw Tesla rise dramatically on talk of USA subsidies for electric cars, and we've seen many themes like carbon and energy swing on the perceptions of future policies. All this volatility and uncertainty of exactly what will be passed affects the overall stock market as well as individual names. What we foresee is legislation and agreement for public infrastructure spending, other social and political issues sure to be divisive and pushed include gun control, a more restrictive environmental and energy policy, and a $15 national minimum wage. Another battle brewing is state funding and how much is earmarked as COVID-19 relief. We expect consensus on bailouts for states but the divide over distribution will hinge on demonstrating clear COVID-19 caused damage. Most states were hard hit by the virus-induced shutdowns and local economies need an infusion of cash. What gets divisive is that the money needed by some states is from pre-pandemic state balance sheets. Massive amounts of money are needed to bail out & prop up deeply indebted states that have large constitutionally mandated pension agreements with public employee unions. Some of these state Budgets budgets are simply unsustainable, but they are counting on the new administration to save the day. We shall see. There will be a lot to talk about. Stay focused on what you can control.


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