10/4/2017
By Charles Payne

I guarantee there is a mathematical formula that quantifies how a groundswell in optimism becomes action that eventually even attracts and encourages folks that aren’t even excited in the first place.   In other words, optimism is contagious because the more people that act on it, the more people that are compelled to act.  We are witnessing this in real time.

 In fact, there are signs mounting from across the economic spectrum showing an uptick in the economy that clearly reflects that groundswell of optimism manifesting into reality.

Stock Market

All major equity indices are at, and continue to make, new all-time highs.  This is because underlying fundamentals are improving.  It’s not about hype; the wheels of commerce are moving.  Most people see the stock market higher as a sign it’s too late to invest because they aren’t measuring underlying fundamentals.

Right now, most stocks are only keeping up with improved fundamentals.  In fact, the last earnings season saw most stocks get hit on the news, even those that posted remarkable results.   I think the stock market has returned to role as a harbinger of things to come. 

Autos

September auto sales came in significantly better than expected.  In fact, according to Auto Data, the pace of annualized sales in September was 18.57 million, which was more than one million above Wall Street consensus.

Sure, there was a bump in demand from areas hit by hurricanes Harvey and Irma, but replacing cars lost to floods is only a small part of the story.  (In the real world, people are still waiting for insurance companies to cough up checks to go out and buy replacement rides.) 

The same experts that were so off on estimates for sales last month warn this pop will be short-lived.  I’m inclined to believe they are too pessimistic.  However, average incentives edged up to $4,048 per vehicle to a record.  That speaks to cars because SUVs, hybrids and pick up truckers are flying off the lot.

Homes

The market moves from government data, but there’s nothing like getting facts from companies doing business on Main Street.  Like today’s observations by Stuart Miller, CEO of homebuilder Lennar.

The company beat on revenue and earnings as incentives were only 5.5% of sales the lowest since 2006.  Mr. Miller observed: These strong results were supported by an improved macroeconomic environment, renewed optimism, wage and job growth, and increased consumer confidence. Miller also dissed government data on housing starts and building permits.

Speaking of 2006, after breaking out a week ago, the homebuilder index could be on its way to re-test its all-time high set March 2006.

XHB

Manufacturing

The ISM Manufacturing report headline is the best since May 2003, paced by a surge in new orders (best in four years) and employment the highest in six and half years.  We are in the midst of a manufacturing renaissance that has the potential to be great if Washington, D.C. doesn’t eventually do its part.

ISM Manufacturing

Beginning to feel a lot like Christmas

Today, the National Retail Federation said a “longer shopping season and strong consumer confidence will deliver retailers a strong holiday season.”

You’ll never hear this in the mainstream media, but our economy is coming together, and you should be less concerned about the overdue correction and focus on long term strategy to ride this renewal. 

Conclusion & Course of Action

Stop wasting your time waiting for the correction or crash.  Stop telling yourself this isn’t going to end well as if a correction or crash would be the end and not the beginning of fresh opportunities to make a lot of money.   The bottom line is the bottom line of America is improving, and it will reflect in the stock market. 

(This isn’t just an American phenomenon the global economy is coming on strong, and even outpacing the United States, but its American companies that stand to reap the rewards.)

The course of action is to be invested.  Finding value is harder, but be true to the effort, which for us is a combination of fundamental, technical and behavioral analysis.   I’m pumped about this rally because the evidence is mounting the nation has moved from survival mode to greatness mode.   Make sure you are doing the same.

Charles Payne

Founder, CEO, & Principal Analyst

Wall Street Strategies

Charles Payne
Wall Street Strategies

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