Henry Clay was a US Presidential candidate in the 1800s, and he was a powerful US Congressman and Senator from the state of Kentucky in his day. Clay served as the Speaker of the House of Representatives and as the Secretary of State. Perhaps Henry Clay’s most significant legacy was as the Great Compromiser.
Henry Clay’s opinion of the perfect compromise was where both parties in a negotiation walked away from the table with a deal that made each side unhappy. On Tuesday evening, the news that Democrats and Republicans reached an agreement to avoid another government shutdown took on a Henry Clay like aura as the details of the settlement became public. While each side of the political aisle found themselves with a bad taste in their respective mouths over the deal, the stock market loved the compromise and equities rallied on the news that the US government would remain open after the deadline for a deal on Friday, February 15.
President Trump did not say we will sign the deal on Tuesday, but he also did not say he would not. Neither political party wants another government shutdown, and the President made it clear that if were to happen, it would be the fault of the opposition party. I am quite sure; they would say the same thing about the President’s party if asked. The odds of another shutdown diminished on Tuesday, and that send stocks higher. The Dow Jones Industrial Average moved 372.65 points or 1.49% higher, and NASDAQ gained 106.71 points or 1.46 on the session. The S&P 500 gained 34.93 points or 1.29% on the session to a new high for 2019.
As the chart highlights, the S&P 500 closed at 2744.75 which is the highest level since early December. The day before, in an interview on CNBC from the ETF conference in Florida, legendary futures trader Paul Tudor Jones said that he expects the S&P 500 to outperform its peers in 2019. Jones mentioned that corporate share buybacks would continue to provide upside support to the index.
The next big event that could provide even more upside to the stock market would be a trade deal between the US and China. High-level negotiators are hard work this week in Beijing to come up with a framework that can lead to a meeting between Presidents Trump and Xi in March to seal a deal that would end the trade dispute that has weighed on both the Chinese and US stock markets since last spring. The spirit of Henry Clay is likely sitting quietly at the negotiating table as a reminder that a deal depends on a great compromise where both sides of the dispute will be unhappy with the result.
The news Tuesday that the US will not face another government shutdown at the end of this week was bullish for stocks. However, President Trump still needs to sign off on the compromise, and the odds are he will be negotiating for more money for border security until the eleventh hour which could cause additional volatility later this week.