Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is an A- (favorable). Employees will see larger paychecks soon because of new, lower tax rates. Larger paychecks puts more money in consumers’ pockets; hence, more spending to help stimulate the economy.
THE FED AND ITS POLICIES: This factor is rated C- (Below average).
BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable). Corporations are in the midst of releasing 4th quarter earnings. During the next two weeks, we will develop a sense of not only the 4th quarter earnings but also how executives see the remainder of 2018.
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.