Investors ‘Animal Spirit’ Elevated on President Trump’s Leadership

Investors ‘Animal Spirit’ Elevated on President Trump’s Leadership

Investors ‘Animal Spirit’ Elevated on President Trump’s Leadership

$DIA, $SPY, $QQQ, $VXX

It has been 14 months since the election victory of President Donald Trump on 8 November 2016.

The surprising upset of Hillary R. Clinton awakened Americans “animal spirits” on the economy and risk on investments, they are still aroused.

The hard data that matter most to the stock market is earnings, and so investors remain Bullish.

The hard data that are the most important to the Fed and the bond market are dotted with soft numbers, which augur for a continuation of the Fed’s gradual normalization of interest rates.

The mood of corporate managements during the Q-4 Y 2017 earnings season was strong. Managements were elated by the cut in the corporate tax rate at the end of last year. Their sentiment was confirmed by the Q-1 Y 2018 CEO Outlook Index compiled by Business Roundtable.

It jumped to 118.6, the highest on the record for the series, which started during Q-1 Y 2003 It is very highly correlated with the yearly percent change in capital spending in both nominal and real terms.

The NFIB Small Business Optimism Index was 107.6 during February, that is the 2nd-highest reading in the 45-year history of the survey, up from 94.9 during October 2016. The net percentage of respondents agreeing that now is a good time to expand jumped from 9.0% during October 2016 to 32.0% during February, the highest in the history of the series, which started in Y 1974.

The M-PMI rose to 60.8 during February, up from 51.8 during October 2016 and the highest since May 2004. This index is highly correlated with the Y-Y growth rate in S&P 500 revenues per share, which jumped to 9.4% during Q-4 Y 2017, the highest since Q-3 Y 2011.

The Consumer Sentiment Index rose during 1-H of March to 102.0, the highest reading since January 2004. It was 87.2 during October 2016, just before President Trump’s election. It was led by a jump in its current conditions component to a record high of 122.8. It was 103.2 just before the Presidential election.

The Weekly Consumer Comfort Index (WCCI) has been hanging around 56.5 over the past 5 weeks It is up from 44.6 at the end of October 2016, the highest since February 2001.

Industry analysts turned cautious on the outlook for the earnings of the S&P 500/400/600 during late Y 2014 through mid-2016, as evidenced by the flat-lining of the forward earnings of these 3 stock market composites.

These 3 forward earnings series started to move into record territory again during the second half of 2016, reflecting the end of the global energy-led earnings recession and mounting signs of a synchronized global economic upturn.

Following the passage of the Tax Cut and Jobs Act at the end of last year through early March, industry analysts scrambled to raise their earnings outlooks for Y 2018.

In January, the ATA Truck Tonnage Index jumped to yet another record high. It is up 12.6% since November 2016. The index is highly correlated with real business inventories.

This suggests that total final demand remains strong in the US.

The Big Q: Why isn’t the strength in final demand showing up in GDP?

The Big A: Some of that demand is being met with goods supplied by imports. President Trump and his supply-side economic advisers believe that cutting regulations and tax rates could boost real GDP growth from 2% closer to 4%. And to make that happen, The Trump Administration is focusing on trade issues.

For the stock markets, solid global economic growth is Bullish.

Tuesday, the major US stock market indexes finished at: DJIA +116.36 at 24727.27, NAS Comp +20.06 at 7364.30, S&P 500 +4.02 at 2716.94

Volume: Trade on the NYSE came in at: 820-M/shares exchanged

  • NAS Comp +6.7% YTD
  • S&P 500 +1.6% YTD
  • DJIA Unch YTD
  • Russell 2000 +2.3% YTD

HeffX-LTN’s Market Indexes Technical Analysis

Date Symbol Price Technical Analysis Support Resistance
20 March 2018 QQQ 167.75 Neutral (0.24) 164.19 169.25
20 March 2018 DIA 247.5 Bearish (-0.26) 246.94 249.02
20 March 2018 SPY 271.22 Neutral (-0.10) 268.47 273.51

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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