The “Heat Map”

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 A+ (extremely favorable). Consumer spending is expected to strengthen as individuals with lower tax rates spend their windfalls.

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. Earnings season has been stellar, with S&P profits growing at a fast pace.

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.

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