Q3 GDP Sees Another Resurgence & Energy Looking Sweet Again

On Friday, the government released a first look at Q3 GDP which I had been looking in the 3% range before the hurricanes hit. It wouldn’t have surprised me if that number was a quarter to half point lower. However, even with the hurricanes, the resilient U.S. economy still grew by 3%. All year, I have written about the economy accelerating to the upside in Q2 and Q3 with the election as the catalyst. Way too many people underestimated the powerful impact of the GOP sweeping the board last November.

Of course, the president wants to and will take the credit for the resurgent growth; they all do But I firmly believe that almost anyone in the GOP would have seen the same or similar results. It’s the sweep that mattered. Anyway, not only is the U.S. economy accelerating higher but so is the rest of the world. Japan and Europe are showing growth that far exceeds analysts expectations and the best numbers in years.

This all translates into booming global stock markets, but that’s nothing new. Remember, stocks move long before the data do, roughly 6 to 9 months. Today, stocks are a little jittery after Kevin Brady offered that a “phase in” of the corporate tax cut is on the table. That’s the same Kevin Brady who once thought the border tax was an absolute certainty. We’ll see. I still think comprehensive tax reform gets passed by mid February, but I am losing a little faith that it will be as good as I once thought.

In the markets today I am looking at a small pullback in stocks, but the energy sector looks to be ready for another leg higher. That could be 10%+ into year-end if the stars line up properly.

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Q2 GDP Baby. Stocks Like It!

This morning, the government reported that the “second look” at Q2 GDP grew by 3%, higher than the original 2.6% first reported. 3% is even higher than any of my most bullish models and it continues to show that the US economy is re-accelerating higher this year.I would love to hear from all those people who challenged my bullish view of the economy or called me out Twitter. They kept telling me that 3% was a pipe dream.

My theme all year has been reality over rhetoric and this epitomizes it. You can call it coincidence. You can credit Trump or Congress or the global central banks. I would say it’s probably all of the above. The fact is that the economy is doing better than at any time over the past three years and should continue to improve with some slight adjustments and volatility from Hurricane Harvey.

Stocks opened sharply lower on Wednesday after North Korea fired a missile over Japan. However, by the end of the day, the bulls stepped up and regained all that was lost and then some. While I still believe stocks are in an intermediate-term trading range, short-term action is certainly strong and the rally that began at the open on Wednesday should continue. With banks, transports and discretionary still not leading, the rally may very well rest its hopes on the semis. Let’s see if they can score a new high for this quarter and possibly challenge their 2017 highs. That’s a stretch, but don’t count them out.

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Big Day for the Stock Market… Twitter, ECB, GDP

The media and masses are all keenly focused on Twitter’s overblown IPO. Too bad you can’t trade it to the short side. Already, some knucklehead paid north of $50. Do people ever learn? While I do not think we will ever see the tech mania like the Dotcom bubble again in my lifetime, we are certainly seeing froth in the social media space and that’s not a good thing!

The real news of the day that is now only a footnote is the unexpected rate cut by the European Central Bank. Although, this is LONG overdue, the Europeans have been about jawboning and threatening the markets rather than action. With inflation in collapse and deflation creeping in, we are getting much closer to what I have spoken about since 2010, QE Europe. The ECB is trillions behind and better get their act together!

U.S. GDP growth came in much higher than expected for Q3, another piece of positive news this morning. So with Twitter, ECB and GDP, you would have expected another romp into new high territory. However, the bears look like they are finally making a meaningful stand. A lot can happen by 4pm, but at this point, it looks like stocks are in routine and healthy pullback mode of 2-6%.

Adding to the notion of some weakness are the recent sentiment surveys which show far too much bullishness among newsletter writers and the public.  With the employment report tomorrow morning and the poor showing this morning, a strong open on Friday could be a nice short-term selling opportunity.

As I discussed, http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20131105.pdf and http://investfortomorrowblog.com/archives/789, I do not believe the bull market is over and we should still see higher highs after this pullback.