Quick Take: Confidence Abounds

Trump, Fedspeak, and key inflation data are the focal points in the early going this morning. First, the President’s conciliatory tone as well as the mention of $1 trillion in stimulus spending during in last night’s speech has traders breathing a sigh of relief today.

On the Fed front, the odds of a rate hike at the upcoming March FOMC meeting are rising (currently at 70%) in response to several key comments from committee members in the last 48 hours. For example, New York Fed President, William Dudley said yesterday the case for a March rate hike is now a lot more compelling. In addition, the Fed’s Kaplan said the Fed should take opportunities to raise rates when they are available. Markets are seeing the potential for a rate hike to occur earlier than expected as a sign of the Fed’s confidence in the economy.

At least part of the Fed’s confidence stems from the “improving” inflation data. This morning’s report on the PCE (Personal Consumption Index – the Fed’s preferred inflation metric), came in at 1.9% on a year-over-year basis, which, of course, is very close to the FOMC’s stated target of 2.0%. Core PCE also improved to 1.7% over the last 12 months.

In response to all of the above, stock futures are pointing to new highs at the open on Wall Street.

Thought For The Day:

Instead of just muddling through, why not make a concerted effort to enjoy your day to the fullest?

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

    1. The State of Trump Administration Policies

    2. The State of the U.S. Economy

    3. The State of U.S. and Global Central Bank Policies

Disclosure: At the time of publication, Mr. Moenning and/or Sowell Management Services held long positions in the following securities mentioned: none. Note that positions may change at any ...

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Abe Jouejati 7 years ago Contributor's comment

@[David Moenning](user:30973) Do you think that we will experience steady growth? Or does the current volatility indicate a new market trend?

David Moenning 7 years ago Author's comment

The trend is your friend! So, yes, the bulls are in control. However, things are getting a bit stretched to the upside at this time.

Charles Howard 7 years ago Member's comment

Sound advice.