We don’t write political statements, but when politics affects the markets we often need to make statements about politics. Yesterday’s US withdraw from the Paris climate accords left us with wonderful teaching moment in terms of trading; price action is all that matters. A wave of CEO’s who run the companies that populate the stock indexes, came out in disagreement with President Donald Trump’s decision to remove the US from the Paris agreement, yet the stocks they guide went up.
Elon Musk, the CEO of Tesla and SapceX announced, “Am departing presidential councils. Climate change is real. Leaving Paris is not good for America or the world.” Tesla went down, being an electric vehicle and solar panel company, but….General Electric CEO Jeff Immelt wrote, “Disappointed with today’s decision on the Paris Agreement. Climate change is real. Industry must now lead and not depend on government”, but GE stock was higher yesterday. Disney CEO Bob Iger also said he will step down “as a matter of principle” from Trump’s Strategic and Policy Forum, but his stock went up. Goldman Sachs CEO Lloyd Blankfein posted his first tweet ever, “Today’s decision is a setback for the environment and for the U.S.’s leadership position in the world. #ParisAgreement,” Blankfein wrote… but GS stock went up. Apple CEO Tim Cook said he spoke with Trump to urge the president not to withdraw but “it wasn’t enough.” He then tweeted, “Decision to withdraw from the #ParisAgreement was wrong for our planet. Apple is committed to fight climate change and we will never waver.” Apple stock closed on it’s highs. Marc Benioff from Salesforc, Brad smith from Microsoft, Sundar Pichai from Google and Mark Zuckerberg from Facebook, all condemned the decision. All 4 stocks, rallied after the announcement.
President Trump made the announcement in the White House rose garden at approximately 3:00 PM eastern time, when the S&P was around 2426. It rallied to a record close near 2430. If CEO’s are against the decision, why did the S&P rally? Because price action predicted it and PR is not important to price. Regardless of how you feel personally about an issue, the market will not care about your feeling, so trade what price is telling you and tell your heart to sit quietly in the corner during working hours.