S&P 500; US Indexes Fundamental Forecast – December 9, 2016

U.S. equity markets closed higher on Thursday, driven by demand for higher risk assets as investors continued to react positively to the election of Donald Trump. Investors are betting big that Trump’s policies will “make America great again.”

Although there was a reaction in the markets to the European Central Bank’s monetary policy decision, this rally is all about Trump’s pro-business economic plans.

In the cash market, the S&P 500 Index closed at 2246.19, up 4.84 or +0.22%. The blue chip Dow Jones Industrial Average finished the session at 19614.81, up 65.19 or +0.33%. The tech-based NASDAQ Composite was up 22.08, or +0.41% to 5415.84.

In the futures market, the popular December E-mini S&P 500 Index closed at 2247.75, up 11.00 or +0.49%.

There was little economic news out of the U.S. today. Weekly unemployment claims came in at 258K, in line with expectations.

Shortly before the cash market opening, the ECB voted to leave interest rates unchanged. The central bank also extended its quantitative easing program until December 2017. It also decided to reduce purchases to 60 billion Euros per month from 80 billion Euros.

ECB President Mario Draghi summed up the day’s events by saying “uncertainty prevails everywhere,” but added the risk of deflation has largely disappeared.

The ECB news was perceived as disappointing because it was widely expected to announce it would continue with its massive trillion-Euro bond-buying program.

Forecast

On Friday, the key reports are going to be Preliminary University of Michigan Consumer Sentiment, Final Wholesale Inventories and Preliminary University of Michigan Inflation Expectations.

These reports are likely to have very little impact on the direction of U.S. equity markets. This current move is all about momentum. There is a lot of cash still on the sidelines that money managers need to put to work. The market is likely to continue to move higher because it’s operating under the “Herd Theory”.

No one can predict when the top will be put in because we are at all-time highs. The market will stop going up when investors decide it will. It’s all about value.

Remember that the stock indexes discount future events and right now, they are expecting some big things in 2017.