U.S. & World Economy by Mark:
While the upticks in both U.S. sentiment and the stock market are in part a reflection of the optimism over President Trump’s pro-growth plans, there is more to the story. The other main contributor is the collective recognition that we finally have a moderately growing global economy with few weak spots. The U.S. was the cause of the global financial crisis of 2008, the first to bottom and the longest to recover. The rest of the world’s GDP expansion has been years shorter and is still catching up to our higher valuations. Secondly, after five quarters of Wall Street corporate profits dropping (the last quarter was 3Q2016), the first and second quarters of 2017 look positive with a deliberate buildup of inventories on optimism. However, that is largely behind us now as the financial markets often project six months or more in advance. The failure to address Obamacare – even with a Republican majority – makes the rest of Trump’s business-friendly agenda much less certain leaving global growth as the remaining reason for bullish optimism. We expect the markets’ sentiments have shifted from “tell me” to “show me” which will cause the financial markets to back and fill until the second half of 2017 becomes clearer.