The #TrumpTrade is supported by the data.
For now at least...
Since Election Day, the Russell 2000 – a domestically-oriented, small cap index – is up almost +12% as investors bet President elect Donald Trump will "Make America Great Again."
Whether it's attributable to Trump or not, the data jibes with the runup. Last week, consumer confidence surged to a year-to-date high (of 107.1 versus 98.6 for October).
We have been suggesting, over the past couple weeks, that 2016 fourth quarter GDP was "looking decent" but that beyond that "the outlook looks decidedly less rosy." Economic data has been coming in better than we expected over the near term.
There's no arguing that these incoming data points would be additive to fourth quarter GDP (see below):
- Durable Goods: The headline number was up a big time (+4.8% sequentially) and up +2.1% year-over-year
- Retail Sales: the retail sales “control group” (a good proxy for what goes into GDP) came in at +4.2% quarter-over-quarter growth rate last week.
Today, we have yet more evidence that the #TrumpTrade is looking durable. The ISM Services data series accelerated to a 14-month high. "It’s short-term, but the #TrumpTrade now has legit economic data to support it," writes Hedgeye CEO Keith McCullough in a note to subscribers. "We’re staying with our view that the US economy is in Quad2 (growth and inflation accelerating, at the same time)."
Here's more analysis from Hedgeye CEO Keith McCullough:
"On the heels of a new cycle high for US Consumer Confidence (107 level reported last week), headline ISM Services accelerates +2.4 points to a 14-month high of 57.2 in November. Business Activity ramped to 61.7 and Employment popped to 58.2."
The takeaway?
Whatever you think about Trump, don't fight the data.
