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What gives with this stock market bullishness? Is it not all Trump?

Peter Switzer
30 March 2017

By Peter Switzer 

The interesting head-scratching issue for the week is why stocks continue to rise this week even after Donald Trump’s health care bill was pulled from a vote in Congress because he didn’t have the numbers. Sure, the political experts did tell me that killing Obamacare was always going to be more difficult for Donnie than selling lower taxes to Republicans, but still, there’s a nagging question mark over the President’s ability to get his own party to do as he tells them.

This should have spooked the stock market players out there, like the first day of the Brexit process for the UK should have. However it didn’t, with most European and US markets up overnight!

Smarties have been telling us that this market positivity since Donnie became President was not all the Trump factor. Don’t get me wrong, he turbo-charged positivity but there were good economic and company profit signs before the November 8 election last year.

So what’s so good now? Try these bananas:

  • US consumer confidence rose from 114.8 to a 16-year high of 125.6 in March, while the forecast was only 114!
  • US existing home sales rose by 6.1% in February to an annual rate of 592,000 units in February - a seven month high.
  • Manufacturing readings around the world show that in most economies the sector is expanding.
  • In Europe, the European Commission says: “Having proven resilient to global challenges last year, the European economic recovery is expected to continue this year and next: for the first time in almost a decade, the economies of all EU Member States are expected to grow throughout the entire forecasting period (2016, 2017 and 2018).”
  • Experts on Japan are all saying that the Japanese economy will grow in 2017, which is a big call for this country. Two months ago, “the central bank raised its gross domestic product (GDP) forecast to 1.4 percent for the current fiscal year, from its previous forecast, made in October, of 1.0 percent growth. For fiscal 2017, it raised its economic growth forecast to 1.5 percent, from 1.3 percent, and for fiscal 2018, it raised its forecast to 1.1 percent, from 0.9 percent.” (CNBC)
  • China doubters have had to cope with the IMF’s latest take on this crucial economy for the world and especially us. “The IMF upgraded its growth forecast for China’s economy in 2017 to 6.5 percent, 0.3 percentage points higher than their October forecast, on the back of expectations for continued government stimulus.” (Bloomberg)
  • On the local front, the number of passengers on the Sydney-Melbourne route rose in January, up 1.6% on a year ago. The Sydney-Melbourne route is a key measure of business activity.
  • Employment rose by 80,000 in the three months to February after a gain of 11,900 in the previous three months here is Oz. Over the past year, employment lifted by 190,400 — the strongest gain in a year.
  • Australia’s population expanded by 348,700 over the year to September 2016 to 24,220,200. Overall, Australia’s annual population growth rate rose from 1.42% to 1.46%. This is good news for economic growth. 
  • The RBA is worried about house prices but as CommSec’s Craig James recently pointed out: “When it comes to the broader economy, the Reserve Bank believes that economic growth and inflation will lift over 2017, ruling out the need to cut interest rates further.”
  • Even though the unemployment rate rose from 5.7% to 5.9%, full-time jobs rose by 27,100 in February alone and the employable population is up by the biggest margin in eight years! This hurts the unemployment rate but is a positive sign for the economy.
  • On jobs, this what James said: “It would be easier to accept the latest jobs data if it lined up with other evidence. But it doesn’t. There have been healthy business surveys in recent months, with the NAB business conditions index hitting 9-year highs in January. Mining prices have lifted, the agricultural sector is buoyant, tourist arrivals are at record highs and more homes are being built than ever before. Certainly, leading indicators like job ads are pointing higher rather than lower. And low real unit labour costs give employers plenty of reasons to be taking on staff. Investors are best advised to move on and focus on the next major economic data, which is retail trade, released on April 3.”

As you can see, there’s a worldwide creeping positivity that explains why commodity prices have rebounded in the past 12 months and why the share price of BHP has gone from $14.21 some 14 months ago to a recent high of $27.89!

It’s not all Donald, despite his big pro-growth plans have helped both economic and market confidence. I’ve always argued that positivity leads to positivity and that’s what we have worldwide at the moment.

Long may positivity last. And if Donnie soon delivers some real tax reform in the USA, we’ll get more of it. Let’s not think of anything else.

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