It's a well worn adage in trading circles that investors buy the rumor and sell the news. It's a reflection of the fact that stocks are a discounting mechanism, meaning they factor in events, profits, whatever, before they happen.
But according to Jeff Kleintop, chief market strategist at LPL Financial, the aftermath of the debt ceiling debacle may be the time to BUY the news, rather than sell it.
"How well has 'sell the news' worked out this year?" Kleintop asks in the attached video, pointing to prior crisis events like the fiscal cliff, the Cyprus bank bailouts, and the Syrian chemical weapons standoff. "None of those made sense to sell, and this one doesn't either."
"You've got an improving earnings backdrop, gasoline prices are down 12% year-over-year, and I think we will have a surprise to the upside here as it relates to retail sales going into the holiday season," he says. "We've got some positives ahead as the market drifts higher for the remainder of the year. You haven't missed it if you haven't bought yet. It's still not too late."
Adding to this backdrop is the fact that Kleintop thinks tapering, the reining-in of the Fed's $85 billion monthly bond buying program, is not going away soon, saying ''the Fed is still your friend."
Furthermore, this Boston-based strategist thinks we won't see the same degree of "partisan rancor" in upcoming negotiations scheduled to begin in the new year. "It lingers in Washington. I don't think anyone wants to go right back to another shutdown, so I think we'll actually make it through that next one with a lot less brinkmanship than this time."
All in, this unabashed bull likes the current backdrop and thinks cyclical stocks and sectors will be the way to go.
"I think all that points to a rising market."
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