Remember Peter Lynch? When the King Tells, You Should Buy

We saw a sharp rally in US stocks on December 26. President Trump’s comments on US markets could have been the main driver.

Mohit Oberoi, CFA - Author

Dec. 27 2018, Published 8:02 a.m. ET

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One of Peter Lynch’s famous quotes is “Whatever the Queen is selling, buy it.” The quote is from the perspective of government-owned enterprises’ IPOs. According to Lynch, the IPOs generally yield good returns. Governments price shares in a way that investors make money. In democratic countries, governments can’t be seen as cheating investors with high priced IPOs.

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President Trump

On December 25, President Trump suggested that markets have bottomed out. Speaking to reporters, President Trump said, “We have companies—the greatest in the world, and they’re doing really well.” He also said, “So I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.”

President Trump’s tweets and comments have delighted bears. Some of his tweets like the “Tariff Man” tweet have led to big down moves in markets. On December 25, it was President Trump’s turn to play Santa for the markets.

Stocks rose

We saw a sharp rally in US stocks on December 26. President Trump’s comments on US markets could have been the main driver. Borrowing from Lynch’s quote, when the President said, US investors brought. President Trump wasn’t the only one calling it a bottom in the markets. Even David Tepper and Jim Paulsen said that they see buying opportunities after the sell-off.

Talking of the markets, the S&P 500 (SPY) rose 4.9% on December 26. In the FAANG space, Apple (AAPL), which was Berkshire Hathaway’s (BRK-B) biggest holding according to the most recent filing, rose 7.0%. Amazon (AMZN) and Alphabet (GOOG) rose 9.4% and 6.5%, respectively.


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