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Newer Highs, Here We Come


Wednesday, November 29, 2017

There’s no real point in debating it, and short-sellers are crying in their beer this morning, no doubt: there is nothing getting in the way of new all-time highs in the U.S. stock market indexes this morning. A strong Q3 earnings season, now followed by consumer confidence at multi-year highs going into holiday shopping season, firming oil prices around the $50 a barrel mark, unemployment around 4% and today’s latest Q3 GDP read of 3.3% all point to a quite rational exuberance in the domestic markets.

The second look at Q3 GDP this morning was even better than expected: 3.3% was a tenth higher than analysts were expecting, and up from the first read of 3.0%. Business investment quarter over quarter rose 4.7% and Personal Consumption Expenditures went up 1.4%, both higher than anticipated. Even Government spending, chiefly on the State and Local side, grew in calendar Q3. Combined with Q1’s third and final 1.2% and Q2’s 3.1%, the coveted 3% full-year economy appears to be a slam-dunk halfway through this happy, healthy Q4 economic outlook.

Even dovish moderate outgoing Fed Chair Janet Yellen told Congress yesterday, “The economic expansion is increasingly broad-based across all sectors, as well as across much of the global economy.” This last part is another notable contributor to bullish spirits: from Europe to Asia to South America, while some concerns do exist they are currently muted relative to recent history, economies worldwide are gaining traction themselves, bolstering the global marketplace in general and the U.S. indexes in particular.

Certainly Ms. Yellen is justified resting on her laurels. After 4 years as the head of the Federal Reserve, the Dow Jones Industrial Average has risen over 10,000 points (83%) and stands at all-time highs this morning with futures up another 75 points in today’s pre-market. Her successor, former Fed Governor Jay Powell, does not look to issue radical changes from Yellen and her predecessor Ben Bernanke’s deliberative policies of monetary custody.

However, with a major tax cut on Capitol Hill closer to raining down on corporate balance sheets — if not by the end of this year, which may still seem more of an Xmas wish list from President Trump, then by sometime in 2018 — complete with a trillion-and-a-half hole blown through the nation’s deficit and problematic individual tax reform policy, Powell may be inheriting more than just a juiced-up stock market; he could also be looking at inflation metrics flipping from near-dormant over the past several years to spiking into the red overnight. Will he still plan to oversee moderate increases to interest rate levels, which currently remain at historic lows?

Even Bitcoin can’t be stopped: the world’s favorite cryptocurrency has zoomed up another 1,000 points in one day, following its psychologically pleasing passage of the 10K mark just yesterday. This is causing market historians to squirm in their seats a bit, but where are Bitcoin’s headwinds today? Is anyone feeling them anywhere in the world right now? And why can’t trees grow infinitely to the sky, anyway?

Mark Vickery
Senior Editor

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