Need to Know: Here’s when post-election stock surges typically fizzle out

It’s Fed day! But a rate hike is basically guaranteed, so the tweeter-in-chief or the Dow (you may have heard it’s nearing 20K) easily could end up stealing the show.

For Fed watchers, the uncertainty today lies in how the central bank “chooses to frame its decision, most importantly with regards to expectations for the future,” says financial blogger Macro Man.

Another key: Will Janet Yellen dodge questions about President-elect Trump and the animal spirits that he has unleashed?

Our chart of the day throws Yellen a bone, suggesting the stock market soon will chill out of its own accord. It shows how historically, post-election rallies have peaked just after Inauguration Day.


The chart illustrates the average post-election advance when a party reclaims the White House. It comes from DoubleLine Capital’s Jeff Gundlach, who hosted another webcast late Tuesday.

Gundlach says stocks could drop around Inauguration Day (Jan. 20). He also cautioned that a 10-year yield above 3% would create all sorts of problems, building on his prior warnings.

What might stay fit as a fiddle? Our call of the day below argues that health care will be the S&P 500’s best-performing sector in 2017.

Check out: Yellen to tell the markets to “cool your jets”

And see: Trump rally could be biggest post-election rise since Hoover

Key market gauges

Futures for the Dow YMH7, -0.08%  , S&P 500 ESH7, -0.08%  and Nasdaq-100 NQH7, +0.05%  are little changed, after the Dow DJIA, +0.58%  , S&P SPX, +0.65% and Nasdaq Composite COMP, +0.95% all closed at record highs again yesterday. See the Market Snapshot column for the latest action.

The call

Health care XLV, +0.81%  is poised to become the S&P’s best-performing sector in the new year, bouncing back from being the worst performer this year. So say Barclays equity strategists Jonathan Glionna and Eric Slover as they offer predictions for 2017.

What about all the hand-wringing over drug prices?

“While political risk remains, positive considerations include cheap valuation, adequate price inflation, favorable cash flow, and stabilizing fund flows,” the strategists write.

You can almost hear the drooling over how cheap the sector looks. Price-to-earnings ratios for sectors are shown in the chart above.

“The PE ratio of the health-care sector is at a 52-week low against the overall market and against almost every other sector,” Glionna and Slover write.

“It even looks cheap against other defensive sectors that have lagged the rally, such as staples XLP, +0.46%   and utilities XLU, +1.03%  . Overall, we believe a strong case can be made that the negative political scrutiny facing the sector is priced in,” the Barclays team says.

To be sure, other analysts argue that battered health-care stocks are likely to remain in intensive care.

The buzz

Trump’s meeting with top Silicon Valley execs is set to grab the spotlight today. Recode’s Kara Swisher says “it’s Trump who is the disrupter and tech the disrupted.”

IBM IBM, +1.69% plans to hire 25,000 workers over the next four years, says CEO Ginni Rometty before she meets with the president-elect.

San Francisco is finally catching up to Pittsburgh: Uber is starting a pilot driverless-car program in the Bay Area, nearly three months after it started a similar program in the Steel City.

Did you hear about how a typo led to the hack attack on Clintonista John Podesta?

Cuisinart is recalling 8 million food processors after broken blades wound up in food.

While J&J JNJ, +0.46%  has dropped out of the bidding for Switzerland’s Actelion Pharma, French drug giant Sanofi SAN, -2.26% SNY, +0.81%  is interested.

Hertz HTZ, +10.56%  plans to rent a new exec to lead the company, and No. 1 shareholder Carl Icahn likes it.

The quote

“We want to leave. We don’t want more massacres. What is happening?” — An unnamed Syrian activist trapped in Aleppo reacts to a ceasefire foundering and a delayed evacuation for civilians.

Here is a separate message from someone else in Aleppo:

The economy

A deluge of data due before the open also could upstage the Fed. The reports expected cover retail sales, producer prices and industrial production.

After the opening bell, a reading on business inventories is slated to hit, then the Fed announcement is on tap at 2 p.m. Eastern, followed by Yellen’s news conference at 2:30 p.m.

Check out: Look for the Fed to hike rates and ignore the elephant in the room

And see: MarketWatch’s Economic Calendar

The stat

9 out of 10 — That is how many of the Republican presidents since Teddy Roosevelt witnessed the start of recession within their first two years on the job, according to CFRA strategist Sam Stovall. All 10 saw a recession within their first term, Stovall writes.

In a similar vein, The Reformed Broker blog has a guest post arguing that unified Republican governments have a “disastrous” history.

Random reads

RIP — tributes hitting for “Growing Pains” sitcom dad Alan Thicke, whose real-life son is Robin Thicke:

40 bowl games in 17 days. There is a reason to watch each one?

New trend: Instagrammers are geotagging their photos in Singapore.

“Rogue One” called the best Star Wars movie since “The Empire Strikes Back.”

It’s the 105th anniversary of humans first reaching the South Pole.

Historian Niall Ferguson: “I was wrong to argue against Brexit.”

The comeback continues for the Polaroid instant photo. It “just feels so cozy.

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