Positive Signals for the U.S. Stock Market and Economy
Last Wednesday, the Commerce Department reported stronger than expected growth in retail sales in January, and the Fed reported factory output increased for the month. Separately, the Labor Department said a closely watched gauge of U.S. inflation rose to its highest annual level in nearly five years. This is the latest sign that years of sluggish price growth could be coming to an end.
I viewed a video last week which stated that a survey of over 1,000 financial advisors showed that although overall market sentiment was positive, the main theme was “cautiously optimistic.” Yes, things are looking up, but increased stock market volatility was one of the top concerns. This really should not be surprising since new record highs often have to overcome pullbacks and a wall of worry. As such, 2017 is looking quite positive for stock investors, but gains will not come without increased volatility in the months ahead.
Another perspective on the stock market comes from Ralph Acampora, director of tactical investments at Altaira Capital Partners, and also known as the godfather of charts. He sees similarities between the Dow's climb during the Reagan administration and its current rally. He believes that the current Dow Jones Industrials advance is similar to the "honeymoon period" that followed Reagan's election.
"From the Election Day of November of 1980 to April of 1981, in just a six-month period, the Dow gained about 15%," Acampora said Tuesday on CNBC's "Futures Now." That was Reagan’s honeymoon period. Since the most recent election, the Dow is up more than 13%.
Just how high could the Dow go? Acampora believes that Dow 22,000 is only a few short months away, meaning that the index could have another 6 percent left to run by summer 2017. I truly appreciate Mr. Acampora’s optimism regarding the stock market. However, I would much prefer positive and well-thought policies be implemented in D.C. that set the foundation for long-term economic growth, versus a short-term run up in the market due to euphoria and the associated emotions of what may be coming. The general public and the stock market can both be fickle in the near term. Currently the bulls and positive sentiment are leading the way; however, disappointment and delays cause the tide to turn.
Interest Rate Increases = Economic Growth
The Federal Reserve Chairwoman, Janet Yellen, stated this week that the Fed may raise rates at their upcoming meetings. The following video discusses the Federal Reserve’s plan to raise interest rates this year and the potential implications. Bottom line, it is a step towards normalcy and a sign that the economy is not only growing, but strong enough to handle it.
“"To handle yourself, use your head; to handle others, use your heart."
"When one door of happiness closes, another opens, but often we look so long at the closed door that we do not see the one that has been opened for us."
Quotes selected by the IA staff
“It takes but one positive thought when given a chance to survive and thrive to overpower an entire army of negative thoughts."
Robert H. Schuller
“Perpetual optimism is a force multiplier."
Tony Moeller, CPA
The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any investment or strategy. A risk of loss is involved with investments in the stock and bond markets.
If you enjoy the commentary and believe others may benefit or find it of interest, please feel free to forward it on. Also, interested individuals can contact us, and we will be happy to add them to our mailing list.