Were you bullish enough on the U.S. stock market? The Nasdaq hit a new all-time closing high yesterday of 5,914. Data on U.S. fourth quarter GDP and Corporate Profits confirmed what we've been saying for some time now: the U.S. economy is heating up.
Don't expect to hear this from the mainstream media, however. Consider a few recent headlines that completely obfuscate this economic reality:
- Business Insider: Stock Market Has Trump Administration Wrong
- The Hill: Yes, The Stock Market Rally Is Over. But Don't Blame It On Trump
- CNN: The Trump Stock Market Rally is Under Siege
Moving on... With U.S. stock indices at or near all-time highs, what now? We say raise sell some U.S. stock market exposure, raise cash... and look for a pullback as a buying opportunity. Here's why.
(Click here to watch Hedgeye CEO Keith McCullough explain this and much, much more today at 9AM ET on a FREE edition of The Macro Show.)
Growth ↑, Profits ↑ = Stocks ↑
#CorporateProfits #GDP
Yesterday we got two critical updates on U.S. economic data that pushed the Nasdaq to all-time highs:
- Consumption: the final government estimate of fourth quarter 2016 GDP was revised up +10 basis points to +2.0% year-over-year. The revision was driven by a +50 basis point revision to Consumption growth.
- Corporate Profits ramped to +9.3% year-over-year (see Chart of the Day below), after 5 consecutive quarters of negative year-over-year profit growth.
Now, think back a few quarter ago and you'll quickly understand why this matters today:
- "By the time US Corporate Profits plunged to their recessionary lows of -11.2% year-over-year (see chart) in December 2015, the US stock market was in freefall and bond yields were well on their way to registering record lows," McCullough writes in today's Early Look.
- The Nasdaq crashed almost -20% between the second quarter of 2015 to the first quarter of 2016.
The lesson? "Get both GROWTH and PROFITS right, and you’ll get a lot of other big things in macro right," McCullough writes.
What Now?
Here are the key takeaways from McCullough in this morning's Early Look morning newsletter:
