Yesterday, I got an email from a subscriber:

Good morning.  My husband and I have seen you mention Animal Spirits in your newsletters several times recently.  I've not heard what you are meaning specifically, but I believe in Animal Spirits and I am intrigued by what you are seeing!  Can you share? 

My response:

Great question - here's the official definition: 

 an·i·mal spir·its

Noun

1.     Natural exuberance

There is a courageous and confident trait in our DNA, which allows us to take risks and to focus on success. I think all Americans have this trait. Whether you’re the bald eagle or even a mountain lion on the prowl, that spirit becomes dormant after years of demonetization and economic roadblocks. As a result, we are seeing record lows for business startups; fertility rates, household formation, and a record high for adults living with their parents...

Now, I think something is stirring in our hearts and souls that are reawakening those ‘animal spirits’. Case in point: Caterpillar (CAT) is a key Trump Stock I talked about on election night, and I had clients in long before the vote. It had been a huge winner coming into Wednesday’s session when the stock halted trading for news. 

That news was a warning that earnings estimates might be too high. Typically, such news sends a stock into a tailspin; when it opened back for trading, there was some selling pressure.  Almost immediately, the stock reversed.

This is a prime example of ‘animal spirits’ reflecting the stock market, which is really just echoing Main Street.

Speaking of Main Street, Donald Trump took a ‘victory lap’ in Indianapolis and began a ‘thank you’ tour in Cincinnati yesterday.  The faces of those workers whose jobs have been spared speak volumes as did the crowds of a forgotten Middle America.

The Market

The Dow Jones Industrial Average meandered most of the session, but it rallied into the close, reaching yet another all-time high, although it’s off from the highest levels of the session.

Its countdown to the November jobs number that is due out at 830, and it really needs to be the lowest number ever.  Yesterday, Challenger, Gray & Christmas reported that layoffs were at the lowest level of the year in November as the U.S. shed 26,936 jobs, 12% below October.  Year to date, 493,288 jobs were cut in 2016, a decline of 5.5% from November 2015.

 

Today's Session

This morning’s jobs report was basically in line but a disappointment for several reasons including:

• Massive labor force decline
• Lost jobs in manufacturing
• Lost jobs in retail
• Hourly wages down from prior month

We’re combing through the numbers for more detail in the afternoon note.

 

Still concerned about the tech wreck, but this session will be a good test for investors to see if there trading harps on backward looking news or the enthusiasm that’s sparked this leg of the rally.  Let's see how the morning shakes out. 

Comments

Great job yesterday on FBN on animal spirits. Your points and interviews were spot on. Thanks for your refreshing approach Charles. For those of you that have not seen his program, I highly recommend it! Ray Weldonr on 12/2/2016 11:01:49 AM

The unemployment rate number is a joke. The number of persons who left the workforce last month spiked to 446,000, that's just last month, and the number of Americans not in the labor force soared to a record 95.1MM. The headline everyone will cite is that the unemployment rate tumbled to 4.6% and it will be sold as great news! The U-3 unemployment rate number has obviously been derived by political forces in the know to deceive those not in the know. And the Fed uses this number as a determinant in its Fed Funds policy - whether to raise or lower rates or not - and as a measure of it's success. Who's kidding who with this hooey? George on 12/2/2016 11:10:18 AM

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