Strong Economic Reports: Bullish For The Economy And Stocks
The markets ended mixed yesterday as they continue to consolidate gains amid recent volatility, and build a new base.
Once again, the financial media continues to point to an incremental rise in rates as hurting the market.
Don't listen to that nonsense.
A measured, well telegraphed rise in rates is good for the economy. True, too much could stifle it. But with the Fed repeatedly talking about 3 rate hikes this year (no surprise), that would only put the Fed Funds rate 0.75% higher at between 2.00 to 2.25%. That's not a market killing rate. It would take years (literally years) of a relentless series of rate hikes to derail the economy. And the economy would have to be on the verge of running out of steam to make that happen.
Instead, the economy is gaining momentum, with GDP last year more than doubling the previous pace, this year expected to be even better, and 2019 even better than that, given the historic corporate tax cuts, which will usher in years of new prosperity, and the individual tax cuts which have only just begun to be felt by consumers.
There will no doubt be more volatility as we head into the next Fed meeting in March where rates are expected to increase by 0.25%. But any pullback in the interim should be looked at as an opportunity to pick up your favorite stocks on sale.
Remember, a pullback in stocks is a bargain if you believe the market is ultimately going higher. And I cannot come up with one credible scenario at this time for why it won't.
In other news, yesterday's Weekly Jobless Claims came in better than expected shedding -7,000 new claims at 222,000 vs. views for 230K.
The Kansas City Manufacturing Index posted "very solid growth" this month at 17.0, beating last month's 16.0 and expectations for 16.5.
And the Leading indicators report also "points to robust economic growth ahead" with a m/m print of 1.0% growth vs. the previous month's 0.6% and views for the same.
Those reports are three of MANY that continue to underscore the strength of this economy and this historic bull market.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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