Backdrop Remains Constructive For Bulls

The State of the Market

Long-time readers know that the primary purpose of my oftentimes meandering market missive is to identify the drivers of the current market environment. And since I spent a fair part of the weekend dodging blizzards on our way to Palm Desert, CA, I'm going to stick to that plan on this fine Monday morning. So, below are what I see as the key factors impacting Ms. Market's game at the present time.

From a big-picture perspective, I see the primary driver being the economic outlook. While there are lots of other things for traders to focus on during any given session, the real key is the fact that the economy is looking good. In fact, many economists are calling for an economic "boom" to occur in the coming months. Which, of course, is a good thing.

As I've noted previously, the economic data have been coming in better than expected. And with more than 100 million shots in the arms of U.S. citizens as of this morning, lots of folks are looking ahead to a return to at least some form of normalcy. Now stir in a couple trillion dollars of economic relief and more stimulus plans in the mix, and well, a "booming" economy seems like a real possibility. And since earnings growth tends to follow hand-in-hand with economic growth, the table appears to be set for the bulls.

Another plus for the stock market here is an uber-friendly group of central bankers. Between Jay Powell suggesting that the Fed "isn't even thinking about thinking about" raising rates - at least until the economy returns to full employment - and the ECB pledging to up their bond-buying efforts last week, we must recognize that the monetary backdrop remains positive. Yes, at some point, the world's central bankers may try to back away from this position. But for now, at least, it is probably best to avoid fighting the Fed.

Next up is the outlook for earnings growth. Cutting to the chase, Wall Street analysts have been busy upping their estimates for earnings in the coming quarters. And it follows that higher earnings means that prices can increase without impacting valuations.

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The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should ...

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