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Morning Commentary

Americans Thrilled by New Economic Situation

By Charles Payne, CEO & Principal Analyst
1/11/2018 9:56 AM
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This morning, Quinnipiac released an exhaustive poll on President Trump with one question on the state of the economy.  The results are mind-bogglingly positive as 66% of those asked see the current economy as excellent or good from 29% a year earlier. 

There is no doubt when most people hear this news they will also hear that most of those asked give more credit to President Obama than President Trump.  It’s such a far fetched notion for a myriad of reasons, that an economy that was essentially driftwood, and now rising like a redwood, would be attributed to the driftwood policies.

As for the poll itself, it must be noted by the mainstream media as they attempt to belittle the most important part (economy):


Questions before 'economy' about President Trump's:

Bottom Line

The economy has come on like gangbusters under President Trump, and it is building momentum (18% rate excellent in January from 11% in December 2017 and from only 2% in November 2016). This is the kind of momentum that doesn’t get snuffed out overnight.

In fact, it’s more likely people will continue to feel better about the economy and take self-fulfilling actions with positive impact.

As for the credit game, there will always be constant media attacks on President Trump, which overemphasize his tweets and underemphasized or ignore his accomplishments.  It’s one thing to tell a person holding a clipboard what they want to hear, but its unlikely people would step into a voting booth to reject this new day in America.

Plus, good news continues to pour in from the tax law, and this is going to make a lot of people second guess where credit should go.

Breaking News

Walmart Citing New Tax Law Announcing

Reasons for Investor Optimism  

Businesses are growing the top line as total business sales have reversed after drifting lower for two years and are now at record levels.

Stronger top line growth means bigger bottom line profits with yearly increases now for five straight quarters.


Those earnings good times are only just beginning, as estimates (Fact Set) suggest strong earnings throughout 2018. These assumptions were before the tax bill was passed, and already today, we’ve seen the impact with two companies.

Lennar Homes (LEN) is partially intriguing as the company missed in part to a delayed closing of a deal, but lower gross and operating margins were yellow flags as well.  Moreover, the effective tax rate edged to 35.5% from 32.7% a year earlier. 

The company is going to benefit greatly from a 21% federal tax rate.  In addition, the new tax law will help top line revenue growth mentioned in the company press release:

"Our results ... benefited from strong demand for homes, low unemployment, favorable interest rates and increased consumer confidence," Lennar Chief Executive Stuart Miller said in a statement.

"General enthusiasm for the strength of the economy, combined with the added tailwinds of recent tax law changes, continue to propel the housing market forward."

2018 Revenue and Earnings Estimates

For Q1 2018, analysts are projecting earnings growth of 12.0% and revenue growth of 6.8%.

For Q2 2018, analysts are projecting earnings growth of 12.3% and revenue growth of 6.8%.

For Q3 2018, analysts are projecting earnings growth of 13.4% and revenue growth of 5.6%.

For Q4 2018, analysts are projecting earnings growth of 13.0% and revenue growth of 4.4%.

For all of 2018, analysts are projecting earnings growth of 13.1% and revenue growth of 5.7%.

Source: Fact Set Data

Manufacturing Soaring

Home Sweet Home

KB Homes posted results that beat the street on revenue and earnings, but the biggest highlight was the new record –low selling, general and administrative expense ratio, which swelled the company’s margins.

Guidance points to company-specific reasons for enthusiasm, but it underscores the current strength in the economy:

"As we look to 2018, we expect conditions will remain favorable in most of our served markets, with solid demand for housing driven by healthy employment, rising household incomes and strong consumer confidence, and continued limited supply."

Kicking the Tires

One of the first areas of the economy to pop in response to the presidential election outcome was housing.  That soft data is becoming concrete and will get better as more regulations are removed.

Home buyer traffic was in contraction since October 2005 before spiking in December 2016 after the election, and since this, its gained even more traction.


I think the big thing driving this economy is confidence. Say what you want about Trump but he is bullish and positive always when discussing business. He reminds me of many great sales guys I worked with over the years. I do believe he is the right president for the time in which we are living. I'm not sure he is a conservative really but that's ok. So many people are against him due to jealousy over him being elected while spending less money than others. They best watch out in the RNC or he will rin as an independent. I enjoy your commentaries this far, thanks.

Stan on 1/11/2018 11:27:04 AM
I hope that the average American will "give credit where credit is due" regarding the grand improvement in our economy. As an independent businessman, I am constantly assessing the strength of our future business by polling all I come into contact with relative to "How is YOUR business doing these days?" Better than 95% of those who respond to my question tell me they are DEFINITELY seeing improved conditions for their businesses and anticipate the coming year will continue to produce better and BETTER opportunities for American business as a whole. In the meantime, it absolutely BAFFLES me that the Quinnipiac Poll finds its respondents giving credit for the improved economy to former President Obama?? Simple question, Charles: WHAT is it going to TAKE to make the average American open his/her eyes and realize the Trump Administration is responsible for our economic growth? And, PLEASE don't tell us that it will take 3 more years of such economic improvement (though I suspect that will be your answer to my question.) Thank you IN ADVANCE for responding.

James Warlin on 1/11/2018 1:19:28 PM
Charles, great stuff, more real news than Fox, and much more of the "good stuff." Sometimes I think that the only real news is about the economy and business. Listening to the political stuff makes my head explode after a couple of minutes. More markets and business, and less politics, PLEASE!

Bob Dunham on 1/11/2018 2:26:37 PM
The holdover support for Obama is in part a result of the fact he was or first Black president and like it or not he was a gifted orator, but unfortunately naive, under educated economically and more of a big govt socialist democrat than free market capitalist type.
And then you add in the rancor and nastiness of the 2016 race that left a bad taste in every democrats mouth. Then the tweeting and 24 x 7 anti trump harangue by CNN, MSNBC, CBS, ABC,NBC, NYT, WAPO, The New Yorker, RollingStone and others and it is a wonder the ratings have improved this much.

garro on 1/11/2018 3:07:43 PM

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