This article is not a recommendation and is intended for educational purposes only.
“Stocks climb a wall of worry.” Most of us have heard the expression. Now it may be playing out before our eyes.
After all, we’ve had worries. Trade wars with China. Presidential tweetstorms. Missiles in the Middle East. Rising interest rates. But as some others cliches state, the bad news “might be priced in.” “That was then, and this is now.” Don’t you know that “markets are forward-looking instruments?”
Today investors are being reminded that the glass isn’t always half empty. News can also surprise to the upside. Just look at the International Monetary Fund hiking its economic growth estimate for the U.S. from 2.7 percent to 2.9 percent. China’s gross domestic product also beat estimates and the White House said numbers were coming in better than they’d anticipated. March housing starts and building permits were also strong. Ditto for industrial production.
There may be evidence that “the party’s just getting started” because inventories remain low across the economy. Most people know that’s true in housing. Less attention is paid to the Census Bureau’s inventory-to-sales ratio, which shows a similar trend. Combine these data points with the pattern of strong industrial employment and positive manufacturing indexes from the Institute for Supply Management. Throw in a surge of domestic energy production and exports. Top it off with a healthy credit cycle. Is it crazy to think there’s more fuel that can still ignite?
Those are just a few thoughts to consider as the S&P 500 pushes back above its 50-day moving average.