Friday was a historical session for the stock market, led by the technology sector, which soared as the original ‘horsemen’ stocks Intel (INTC) and Microsoft (MSFT) joined new powerhouses Alphabet (GOOGL) and Facebook (FB).

You might be asking where Amazon is. The stock is part of the S&P Consumer Discretionary sector. Yep, Amazon was joined by Netflix (NFLX) to drive the sector to its all-time high.

I have been combing through the data and saying for a while that the American consumer is coming back. While it is business enthusiasm and investment that makes me most bullish, Main Street has to see its fortunes improve and it’s beginning to happen.

It’s all about renewed confidence, which is contagious. The Federal Reserve calls it the ‘virtuous cycle,’ but money printed out of thin air and parked at big banks will never stir animal spirits.

What’s stirring them now?

• Stock Rally          
• Home Prices (new home average at an all-time high)
• Employment
• Signs of Wage Gains

Pulse of Consumers

Consumer Sentiment from the University of Michigan (the final October report) reads that consumers are unusually optimistic about the economy, and are expecting good times during the year ahead and over the next 5 years as well without interruption.

Five years of optimism is the kind of runway that sees Americans starting families, buying homes, and making investments. As fewer Americans live in the moment and get back to embracing the American Dream, which hinges on long-term building blocks, it will add fuel to the economy.

Self-Fulfilling Prophecy

I say this newfound optimism begets higher spending which begets hiring and higher wages which also beget spending hence Friday’s GDP report which blew away Wall Street consensus.

3.0% GDP against consensus of 2.5%

Key highlights:

• Consumer: +2.4%
• Durable Goods: +8.3%
• Domestic Investment: 6.0%

 Investment Lesson

Let’s say that six months ago, you had $1,000 to invest. Would you have bought Friday’s big winner Amazon (AMZN), or J.C. Penney (JCP), the big loser?

The fact is that most would have bought JCP because you could have gotten almost 200 shares, but only one share of Amazon at the time.

Friday’s $1,000 investment results:

• AMZN +$190
• JCP -$420

The bottom line as investors - don’t fret too much about whether you are chasing stocks, or limiting your investing options based on share price.  Just focus on the great names – a name you know is great rather than making the market more of a roll of the dice.

The Bullish Chart

Meanwhile, when you spy a chart on the stock market, realize this leg of the rally mirrors a lot of other charts, including any confidence read, including optimism about the current job market (Gallup).  

It’s a good time to look for a quality job, and it’s a good time to be an investor, too.

 

Today’s Session

After much chatter and speculation, this morning Paul Manafort, former Trump campaign manager, and Rick Gates, former Trump campaign official and former Manafort business associate, have been indicted and have turned themselves in to Robert Mueller, Justice Department Special Counsel. The indictment charges “conspiracy against the United States.”  They are also charged with making false statements.

The indictment states “Manafort used his hidden overseas wealth to enjoy a lavish lifestyle in the United States without paying taxes on his income.”  Among the charges are money laundering of more than $18 million to buy properties and services and tax fraud.  Gates is accused of sending $3 million plus from offshore accounts.   

On the economic front, according to the U.S. Bureau of Economic Analysis (BEA), personal income increased 0.4% to $66.9 billion in September. Disposable personal income (DPI) increased 0.4% as well to $53.0 billion and personal consumption expenditures (PCE) was up 1% $136.0 billion.

 

 

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