It was another record day and another day of yawning coverage focused on the Chinese trade deal, rather than the remarkable economic revival and Main Street’s optimism. You may have heard that Homebuilder Optimism rocketed to its highest level in twenty years, but you may not have seen the breakdown of the three components, particularly the traffic of prospective buyers.
The traffic of prospective buyers climbed to 58, matching the December 2017 level, the highest level since December 1998. Moreover, the upward slope of this component since bottoming last December (see red bar) matches perfectly with the Federal Reserve reversing its course and attitude on rates. I have observed signs of greater household formation, which is so critical for the economy now and over the long-term.
Also, last year, we saw record low fertility numbers in the United States - we need marriages and babies. Turning this trend around means there must be extreme optimism overall and individual confidence in their own financial situation. By many measures, this is happening right now. The most recent example is from yesterday’s Quinnipiac University Poll (Q-Poll).
Q – Poll
The Q-Poll is one of the better polling sources, although 99% of them are terrible when it comes to presidential results manipulated by weightings, the way questions are asked, and other pollster tricks. Biden is holding tough, and Warren has found her footing after a massive swoon when folks found out how much it would cost to get on the fast track to Soviet-style healthcare (and that didn’t include health outcomes).
The impeachment needle hasn’t budged, and a majority remain against the idea of impeaching President Trump. The President’s job approval numbers hit a Q-Poll high of 43%, up to 5% since Democrats and the media have made impeachment their single focus.
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Confidence
It doesn’t carry the weight of the Conference Board or the University of Michigan Confidence and Sentiment reads. However, yesterday’s Q-Poll confirms the trend. I mentioned that people must be confident to keep this economy and the stock market momentum going, and these numbers suggest this juggernaut keeps going. A total of 73% of registered voters feel more positive (excellent and good) about the economy, which is the highest level in 18 years.
Just as the traffic of prospective buyers has soared, so has those folks saying the economy is “excellent.” In fact, the 26% level is the highest ever.
Economy | Excellent | Good | Total |
December 18, 2018 | 14 | 51 | 65 |
January 15, 2019 | 15 | 49 | 64 |
December 16, 2019 | 26 | 47 | 73 |
More importantly, while only 45% say the economy will be better next year, a full 79% feel very optimistic about their own personal fortunes next year. That discrepancy can be explained through the political prism and cocky college graduates that see disaster for everyone else but massive fortune for themselves.
2020 Optimistic | Total | Republicans | Democrats | Independents |
Overall (nation) | 45% | 72% | 24% | 45% |
Yourself | 79% | 89% | 71% | 82% |
Manufacturing 2020 Rebound?
The Empire State Fed Manufacturing Report continues to suggest a strong rebound in manufacturing next year, led by major investments in capital expenditure (Capex) and technology spending.
Expectations (six months from now), December from November:
- General Business Conditions: 29.8 from 19.4
- New Orders: 35.6 from 24.2
- Employment: 12.4 from 12.5
- Capex: 26.1 from 19.2
- Technology Investment: 27.5 from 15.1
737 Max Fiasco
After the close, Boeing (BA) acknowledged it would halt production of its troubled 737 Max but promised there would be no layoffs. The company itself has hinted in the past this could happen, although the last official communique talked about regulatory approval this year. That statement made things worse, and it’s clear the company won’t get ahead of global regulators. The grounding will have negative implications throughout the manufacturing and the airline industry. However, if management can avoid layoffs, that would be significant.
There is much work to be done with the reputation of that plane and the company, but I think the stock is still a long-term hold. That said, the shares must hold $320 on a closing basis and will be tested today. We’ll have a more in-depth look at the stock in the Afternoon Note.
Portfolio Approach
We opened a position in Health Care yesterday. If you have any questions, contact your account representative, or email research@wstreet.com
Today's Session
The housing sector is showing signs of continued momentum. This morning, the U.S. homebuilding increased more than expected and permits surged, as lower mortgage rates continue to boost the housing market
- Housing Starts +3.2% MoM vs. 2.4% expectation
- Building Permits +1.4% MoM vs -3.5% expectations
Two of four regions posted a gain in starts, led by a jump in the South to the fastest pace since March 2007. Starts in the West also advanced.
Also positive data was released this morning. Industrial Production expanded by 1.1% in November after contracting 0.9% in October. Manufacturing production also rose 1.1% in the same period.
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