Pullback Over? GDP Report a WOWZA

All week stocks have been in pullback mode but it sure doesn’t feel like it. What is the S&P 500 down from its intra-day peak? Not even 1%. Overnight trading suggests a test of 2019 highs. Again, when the masses have been sitting in so much cash all year, waiting for stocks to go down 5%, 10% and 15%, it provides a strong cushion against such a decline. The slightest bit of weakness continues to be bought, until it isn’t. And then a real pullback will begin.

This slight pause in the major indices hasn’t even touched any short-term determinants of trend. No glaring internal weaknesses. No sector warnings. No nothing. The test will come at the end of the day if stocks are near 2019 highs.

On Thursday, the government announced that Q4 GDP grew by a much better than expected 2.6%. My non-scientific stab in the dark thought it would be much lower. 2.6% with the government shutdown and collapsing retail sales is astonishing. There continues to be widespread underlying strength against pockets of despair in auto loans, credit cards and housing. I keep hearing the naysayers scream about recession coming next month, but they have been saying that since the election of 2016.

It’s really amazing. In my 30 year career, I have watched Reagan, Bush, Clinton, Bush and Obama all preside over varying economies. Almost uniformly, everyone rooted for a strong economy regardless of political persuasion. It’s certainly no secret that I was anything but a fan of Mr. Obama. However, I knew that his success would be my success. For the good of the country and its citizens, we all put politics aside and cheered for economic success as everyone won.

Today, very sadly and pathetically, that’s no longer the case. While I understand 100% how polarized our country is and how much hatred there is for Donald Trump, the country has now stooped to a new level. And I have heard it firsthand. People actually overtly and loudly root for a serious recession so Trump will fail in his reelection bid. That’s seems like treason to me. How could anyone hope for unemployment to rise? For people to lose their homes? Wipe away their savings? Raid their retirement accounts? That is about as despicable and disgusting as it gets.

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Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
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  1. George Merrick says

    I am not rooting for a recession. I am happy that my stocks are doing well and have recovered almost all of the December paper losses. However, I’d like to make two points:
    1) Most economists agree that the whoever is in the office of the President, they have minimal impact on the short-term economy. They unfairly get the blame if the economy drops and unfairly get credit if the economy is strong. The US economy has all the maneuverability of an fully loaded super tanker, i.e., it has a lot of momentum and stopping or slowing takes a long time!
    2) A good economy is not a reason to keep a proven pathological liar and immoral, long-term criminal in office. Hitler was really good for Germany’s economy – he brought Germany out of a depression that was much worse than here in the US during the 1930’s. I hope you agree that does not mean Hitler was a great leader! In the end he only brought ruin and death.

    • Paul Schatz, President, Heritage Capital says

      Thanks for the comments George. I wholeheartedly agree with #1. Congress’ composition, the Fed and the length of the current recovery or recession can far outweigh POTUS’ impact although when one party is in total power, they do deserve more credit and blame.

      I disagree on #2. Hitler did not bring Germany out of the depression. He preyed on German citizens BECAUSE of there post WWI plight and the failure of the Weimar Republic. Germany struck the single worst post war surrender in history, forcing them to print money to meet their obligations which the cost of living skyrocketing and confidence at all-time lows. No matter how much anyone may hate Trump and whether he will be proven to be a criminal, comparing him or any US leader to Hitler or Stalin or Mussolini is without foundation and irresponsible. Trump may be an egomaniacal narcissist who never had any real intention of becoming president, rules by the order of chaos and breaks every historic norm, but he has also proven to employ mostly pro growth economic policies that are succeeding. And last I checked, I don’t think he has murdered anyone nor locked up political opposition.

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