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This Week: Strong Earnings vs. Uncertainty Over Spending Bill Deadline

The markets capped off another spectacular week last week with more new all-time highs.

The strengthening economy, historical tax cuts, and surging earnings will go up against an ever growing uncertainty over the spending bill deadline this week.

This Friday, January 19th, is the official deadline for a spending bill agreement or the government will shut down. They have avoided this twice last year by kicking the can down the road. But that can has now stopped at the end of this week. And all eyes are on Congress.

The main sticking point is DACA and border security. Both sides have dug in. And it looks unlikely a deal on those issues will be reached in such a short time. But maybe a deal on DACA doesn't need to be reached by Friday after all. In reality, DACA is still good thru March 5th. And with legal challenges, it could go on even longer without a deal. So we'll see what happens. But DACA or not, a spending bill compromise is still going to have to be reached to keep the government funded.

Either way, I maintain my belief that any volatility as a result of a spending bill failure would be a transitory event and should be looked at as a fantastic buying opportunity. Will we get it? Who knows. If there is a pullback because of this, count your blessings to be able to pick up some of your favorite stocks at bargain prices.

But the underlying fundamentals of the economy and the market are strong. So get used to buying on strength. But be prepared to act on any weakness, regardless of where it emanates from, as those opportunities could be far and few between this year.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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