Yesterday’s abrupt firing of FBI director James Comey, which reportedly surprised even many top officials, sent political shockwaves across Washington. The official reason was Comey’s handling of the email controversy involving Hillary Clinton. Given the ongoing investigation into possible Russian involvement in the election and Moscow ties to the Trump campaign, and President Trump’s previous positive praising of the now former director, however, the timing does raise some eyebrows.

From an investment perspective, the firing of an FBI director on its own doesn’t carry much economic impact, but if it significantly delays Trump from pushing through his pro-business agenda, then the market may react accordingly. However, whatever the reason for the termination, it’s the latest controversy for the Trump Administration, which has gotten off to a tumultuous start. Trump has already fired his acting attorney general, national security adviser and now the FBI director. We hope that these distractions will not preclude his administration from pushing through the growth-boosting reforms he promised.

The firing helped the bond market rally, but the equity market reaction was more muted. The U.S. stock market continued to trade in a fairly tight range, as it has since the beginning of March. The performance of the small fry, which has significantly underperformed that of blue chips this year, in particular the mega caps like Apple and Google, suggests some underlying investor nervousness. Small-cap stocks generally offer the most robust appreciation potential, the fact that it is the large caps that have performed better indicates that market participates are foregoing the biggest potential gains to buy the safer bets.

Our stock indicator is currently slightly bearish, predicts some downside bias in the near term, but it’s not downright predicting a major decline. Absent some economic shock or two, stocks will probably continue to tread water for the time being.

Earlier today we added a put option to our portfolio, the Energy Select Sector SPDR (ETF) December 68 put. XLE is an ETF of oil and gas producers and servicers. As our oil indicator signal declined into “-2” territory today, oil and oil stocks rallied today thanks to the weekly EIA crude inventory numbers, we saw an opportunity to follow our indicator. We remain bullish on the long-term prospects of oil, but the indicator signals are independent of our own opinions.   

Our other open option trade is the SPDR S&P 500 ETF (SPY) June 220 put, which remains a hold. This is not an indicator-based trade, but rather an ongoing hedge against the market. We may roll this over into a longer-dated put option.

Besides the options, we currently hold open (long) positions in the following stocks: NovaGold (NG), Gabriel Resources (GBRRF), Schlumberger (SLB) and Trilogy Metals (TMQ).