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Morning Commentary

Big Spenders Stepping Up
By Charles Payne, CEO & Principal Analyst
3/7/2017 9:34 AM

On Monday, Gallup Daily released its monthly spending report, which asked Americans how much they spent “yesterday.” The average of $101 is the highest amount for the month of February going back to 2008.  In fact, it’s only the seventh time in the past nine years that a monthly average has been above a C-Note. 

The economic data this week includes Redbook Retail Sales report, the January Consumer Credit that’s released today, and the jobs report on Friday. It’s crucial that we continue to get signs of soft sentiment data that reflects in hard data. 

All the ingredients are in place for a major bump in spending, in addition to lower taxes; more importantly, wages must heat up in the long run.  Now, anecdotal evidence has hinted that this should have occurred months ago; this Friday, we’ll see evidence that this economy is starting to cook with gas.

Wealth Effect?

The minute you walked in the joint,
I could see you were a man of distinction,
A real Big Spender,
Good looking, so refined.
Say, wouldn't you like to know what's going on in my mind?

"Hey Big Spender"

-Shirley Bassey

The big story from the spending report is that wealthier households are spending big time:

  • Households earning less than $90,000 saw average daily spending edge higher to $73 from $70
  • Households earning more than $90,000 saw average daily spending surge to $168 from $142

That pop in spending of $26 month-to-month is one of the largest in the nine-year history of this survey.  Call it the wealth-effect, but people with cash are putting their money to work.  The market is at all-time highs. Unlike the all-time highs established under the Obama presidency, folks now understand that no one is going to look to punish them for having robust 401Ks – it’s only going to get better.

U.S. Consumer Spending, by Annual Household Income

The market doesn’t like news of wiretapping scandals, and it braces for the repeal and replacement of Obamacare. The key to generating high share prices is the wealth-effect with higher purchases and lower taxes, which sparks a higher take-home pay. 

American Job Commitments

The virtuous cycle continues with Exxon Mobil announcing its massive investment and hiring plan that elicited several tweets from our Commander-in-Chief:

@realDonaldTrump

45,000 construction & manufacturing jobs in the U.S. Gulf Coast region. $20 billion investment. We are already winning again, America!

@realDonaldTrump

Buy American & hire American are the principals at the core of my agenda, which is: JOBS, JOBS, JOBS! Thank you @exxonmobil.

This particular project from Exxon Mobil goes back a couple of years. However, management felt compelled to say it’s confident that it can comply because it anticipates pro-business, pro-American worker fiscal policies.

Today’s Session

The market looking to open lower as investors continue to brace for the jobs report on Friday.  Meanwhile the big political hot potato gets a little hotter this morning, as our trade deficit leaped 9.6% in January to $48.5 billion.

United States Balance of Trade

This is the highest monthly deficit in five years driven by a combination of factors, including the stronger dollar and increase in the price of crude oil.

United States Balance of Trade

Noticeable Imports Increases:

  • Crude oil +$1.7 billion
  • Cell Phones+1.0 billion
  • Auto Parts +0.9 billion
  • Passenger Cars +0.7 billion

Noticeable Export Increases:

  • Auto Parts +$1.3 billion
  • Passenger Cars +$0.9 billion

Deficits

  • China -$28.9 billion
  • Japan -$4.9 billion
  • German -$4.5 billion
  • Mexico -$4.3 billion

A tweet this morning from President Trump putting pressure on drug and biotech names:

Donald J. Trump‏

“I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!”

Let’s continue to sit back but please be ready to pounce as the market drifts – there are a dozen stocks I would love to own on a dip.  CP


Comments
Glad to see you use such positive and still meaninful descriptive phrases as "animal spirits" and "cooking with gas". Now, revive the phrase "It's the economy, stupid!"

Charlotte Dougherty on 3/7/2017 2:14:11 PM
You know, Charles.....You must really like that Shirley Bassey rendition of "Hey Big Spender"....I'm pretty partial to it myself!On the other hand, the Mkt. just celebrated its' 8th anniversary of the 2009 bottom. Kudos to all my fellow investors who did not panic and sell but rather rode that Tiger to Hi's that very few of even us thought would come this soon!

Charles A Haselberger on 3/7/2017 5:51:11 PM
 

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