Chris Ciovacco

About the Author Chris Ciovacco

Chris Ciovacco is the founder and CEO of Ciovacco Capital Management (CCM), an independent money management firm serving individual investors nationwide. The thoroughly researched and backtested CCM Market Model answers these important questions: (1) How much should we allocate to risk assets?, (2) How much should we allocate to conservative assets?, (3) What are the most attractive risk assets?, and (4) What are the most attractive conservative assets? Chris is an expert in identifying the best ETFs from a wide variety of asset classes, including stocks, bonds, commodities, and precious metals. The CCM Market Model compares over 130 different ETFs to identify the most attractive risk-reward opportunities. Chris graduated summa cum laude from The Georgia Institute of Technology with a co-operative degree in Industrial and Systems Engineering. Prior to founding Ciovacco Capital Management in 1999, Mr. Ciovacco worked as a Financial Advisor for Morgan Stanley in Atlanta for five years earning a strong reputation for his independent research and high integrity. While at Georgia Tech, he gained valuable experience working as a co-op for IBM (1985-1990). During his time with Morgan Stanley, Chris received extensive training which included extended stays in NYC at the World Trade Center. His areas of expertise include technical analysis and market model development. CCM’s popular weekly technical analysis videos on YouTube have been viewed over 700,000 times. Chris’ years of experience and research led to the creation of the thoroughly backtested CCM Market Model, which serves as the foundation for the management of separate accounts for individuals and businesses.

Higher Yields, Lower Taxes Would Scale Up Earnings Significantly

Lower Taxes Should Boost Profits

Markets typically need a catalyst to break out of a multiple-year trading range. One possible candidate is the significant shift in market expectations related to the reliance on monetary policy relative to fiscal policy.

Lower Taxes And Higher Rates

The financial markets have been highly dependent on global central bankers in recent years (monetary policy). After the U.S. election, markets began to anticipate the possible benefits of President-elect Trump’s platform. From Yahoo Finance:

“We estimate that President-elect Trump’s corporate tax plan could boost S&P 500 earnings by $180bn,” writes Barclays’ Jonathan Glionna. “We think the market is underappreciating the likely big boost to S&P EPS from a lower corporate tax rate and the boost to bank profits from rising yields (and lower pension expense) and the much higher chance now of a long lasting economic expansion that rivals the 10-year US record,” Bianco added.

Numerous Longer-Term Market Signals

This week’s stock market video covers a long-term breakout in an economically-sensitive sector (XLB), describes a shift that has resulted in stocks outperforming bonds in the past, and updates the status of numerous long-term signals that have accrued in recent months.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Goldman’s Take On Trump’s Tax Plan

Sentiment shifts need to be backed by fundamental shifts for market gains to continue. The odds are extremely high corporate taxes are going to be lowered under the Trump administration. Lower taxes will impact earnings; the only question is the magnitude of the impact. From Yahoo Finance:

In a note to clients shortly after the election, analysts at Goldman Sachs outlined a number of tax scenarios that could play out in a Trump administration. Among them is a reduction in the statutory tax rate from the current 39% to 25%, while companies keep their strategies to pay less effective tax. Under this scenario, an effective tax rate falling to 15% could see S&P 500 earnings rise 26% in 2017 compared to 2016.

Investment Implications – The Weight Of The Evidence

Earlier in 2016, the markets were being led by defensive sectors (SPLV). Given the post-election shift in expectations regarding growth, earnings, inflation, and interest rates, demand for economically-sensitive sectors (SPHB) has improved relative to defensive sectors. Details regarding the shift below were outlined in a November 18 analysis.