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Morning Commentary

DID LYFT MARK THE PEAK?

By Charles Payne, CEO & Principal Analyst
4/4/2019 9:30 AM

There were speed bumps yesterday that almost derailed the rally, but major indices found buyers into the close, which was a buy signal in itself. 

The last speed bump was news Carl Icahn sold his Lyft shares before the Initial Public Offering (IPO).   That’s certainly a yellow flag. For those that have followed me for years, you know that I point to the IPO of the European Internet company World Online fiasco as the moment the Tech Rally died. As the champagne flowed on the first day of trading, someone asked World Online CEO Nina Brink what she would do with her newfound wealth.

She replied that she had already sold all her stock to one of the participating banks before the offering.  Everyone in that room immediately felt like suckers, as they recorked the champagne and wondered what happened. Soon, investors around the world began to sober up and it was the end of the tech boom. Carl Icahn isn’t an executive at Lyft, but it’s not the best look after a sloppy debut. You can read the original two reports covering the World Online IPO as they are attached as a PDF.

S&P 500 Index

+0.21%

Communication Services (XLC)

+0.38%

Consumer Discretionary (XLY)

+0.70%

Consumer Staples (XLP)

-0.49%

Energy (XLE)

-0.96%

Financials (XLF)

+0.30%

Health Care (XLV)

-0.13%

Industrials (XLI)

-0.30%

Materials (XLB)

+1.31%

Real Estate (XLRE)

-0.11%

Technology (XLK)

+0.81%

Utilities (XLU)

-0.16%

 

The Health Of The U.S. Consumer

One day, there will be no waiting for a trade deal or other headlines items, and it will be a reminder that stocks have gone up and down for years before the trade battle. This is what investors must keep in mind as we move past the headlines and into what’s really moving the market.

The key to the stock market rally is the American Consumer.

There are many ways to gauge the health of the U.S. consumer, in addition to labor and wage trends.  How much cash is left after paying bills?

There are two measures of actual household purchasing strength based on the ability to pay bills and have cash left over. While household debt has increased since the Great Recession, hence adjusting for higher wages, the average American household is better equipped to handle monthly bills, therefore having more disposable income for spending.

The American consumer will continue to carry the economy as long as the dough keeps rolling in, and Washington, D.C. shenanigans don’t derail the economic agenda.

Household Debt Impact

4Q 2007

4Q 2018

 

Debt to Service Ratio (DSR)

 

13.22

 

9.88

 

  • Mortgage

 

7.21

 

4.25

  • Consumer

6.01

5.63

 

Financial Obligations Ratio (FOR)

 

18.13

15.33

 

Mortgage Debt Service Payments as % of Disposable Income 

Consumer Debt Service Payments as % of Disposable Income 

Household Financial Obligations Service Payments as % of Disposable Income 

 

After the close, shares of Boeing (BA) rallied to $400 a share. If the company releases a 737 Max fix, just as more details emerge on those horrific accidents, the entire tale could be put behind them. 

In many ways, this is the single most important stock in the entire market. If it takes off, we could blast through all-time high levels very quickly.

Portfolio Approach

Communication Services

1

Consumer Discretionary

4

Consumer Staples

1

Energy

1

Financials

1

Healthcare

2

Industrial

4

Materials

3

Real Estate

0

Technology

2

Utilities

0

Cash

1

Today's Session

Ahead of tomorrow’s jobs report we are learning that initial jobless claims declined 10,000 to 202,000 the lowest level since early December 1969.

That was the week ‘Na Na Hey Hey Kiss Him Goodbye’ was the number one song on Billboard – there something very cool about this although I can’t put a finger on it right now.

Initial Jobless Claims

image.png


 

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