This GDP Prediction Means Trump Will Win In 2020

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Posted: Apr 16, 2019 9:14 AM
This GDP Prediction Means Trump Will Win In 2020

Source: AP Photo/Paul Sancya

After a phoenix – like rise, against all odds, recent manufacturing data suggests the momentum has dried up, and that is enough to raise a yellow flag of concern.  The Empire State Manufacturing Report beat consensus on current conditions, but expectations swooned to a three-year low.  In fact, expectations have only been this low five times since 2005, and four of those were during recessions.

Key Components

Current 

  • General 10.1 +6.4
  • New Orders 7.5 +4.5
  • Shipments 8.6 +0.9
  • Prices Paid 27.3 -6.8
  • Employment 11.9 -1.9

Yellow Flags: Prices plugging 6.8 percentage points is problematic as is the sharp percentage decline in employment. 

Expected

  • General 12.4 -17.2
  • New Orders 20.5 -8.5
  • Shipment 22.7 -5.0
  • Prices Paid 37.1 -3.5
  • Employment 17.3 -0.3

Red Flags: The entire report is a red flag, but there are extenuating circumstances, including a global manufacturing slump.

Summation

The Federal Reserve will feel somewhat vindicated by the news, but at the same time, they will wonder if they have the right formula or tools to help the economy.  All the while, endless complaints by President Trump has Powell & Co under a microscope.

Already, there has been a de facto admission that the December rate hike was a monumental mistake.

Earnings Season

The market isn’t concerned about manufacturing or the Fed now, as earnings season ramps up.  Coming into the week, 29 S&P 500 companies reported first quarter 2019 financial results:

  • 48.3% beat on revenue
  • 79.3 beat on earnings

In the past, missing on the top line and beating on the bottom line normally was greeted positively with buyers bidding the underlying share price higher.  I don’t think this is going to happen this time around. 

Certainly, that wasn’t the case for Goldman Sachs (GS), which posted a monster beat on earnings, but the slight miss on the top line sent the shares tumbling.

This morning's reports include:

  • Bank of America (BAC): $0.65
  • BlackRock (BLK): $6.20
  • Comerica (CMA): $1.94
  • Johnson & Johnson (JNJ): $2.04 
  • Progressive Group (PGR): $1.38 
  • Prologis (PLD): $0.72 
  • UnitedHealth Group (UNH): $3.59

I’m watching Bank of America (BAC) and United Healthcare (UNH) closest.  The former can be a good proxy for Main Street economy, and the latter can show if the current model is profitable, until the federal government wrecks it – which I think has less than 50% chance of happen because of political in-fighting.

Trump Wins

Yesterday, Goldman cited the economy this year and next, and it concluded people will ultimately vote with their wallets and pocketbooks, and that means President Trump wins in 2020.  Their modeling highlights:

GDP

  • 2019 2.5%
  • 2020 2.3%

Unemployment Rate

  • 2019 3.7%
  • 2020 3.3%

I think it’s the unemployment rate that will scream reelection, as 3.3% next year would be the lowest since October 1953.  Juxtapose this to Democrats promoting harebrained dreams like sky high taxes to clean up the climate, while claiming it would also trigger more jobs and better wages for all Americans.  Yet, that's what's already happening.

Getting Better Faster

In fact, momentum has gotten better for American workers.  From fourth quarter 2017 to third quarter 2018, unemployment rates declined dramatically.

  • White -0.8 percentage points
  • Hispanic -1.4 percentage points
  • Black -2.3 percentage points

Percentage point decline for Black unemployment from fourth quarter 2017 to third quarter 2018, includes huge moves in some key swing states.

  • MI -8.8
  • MS -3.3
  • OH -6.7
  • SC -4.9
  • IN -6.1

By the way, massive gentrification has crushed Black Americans living in Washington, D.C.  It’s really scary that as D.C., and the surrounding areas, became the wealthiest in the nation, black unemployment surged +2.5%.

Nonetheless, the unemployment rate between White and Black Americans has recently narrowed to the smallest gap ever.   There is work to be done, but we are in the midst of something that has never happened in the United States.

Portfolio Approach

Communication Services

1

Consumer Discretionary

4

Consumer Staples

1

Energy

1

Financials

1

Healthcare

1

Industrial

3

Materials

3

Real Estate

0

Technology

2

Utilities

0

Cash

3

 

Today’s Session

"LVMH’s Recent Stock Performance Propels Bernard Arnault To World’s Third Richest, Ahead Of Warren Buffett"

April 10th headline above had socialist crowd screaming.

"Pinault, Arnault Families Pledge €300 Million to Rebuild Notre-Dame"

Today's headline has left them speechless.

Our prayers are with the people of France and people of the Catholic faith around the world.

This morning trends

IPO’s not named Lyft (LYFT) continue to explode.  Jumia (JMIA), the African internet company, was priced at $14.50, rallied 75% on the first day of trading, closed at $25.46, and is looking to open at $34.00 today.

Blue Chip Earnings Continue to Shine

Johnson and Johnson (JNJ)

  • Beat on revenue
  • Beat on earnings
  • Guides sales higher 2.5 to 3.0% from 2.0 to 2.5%

United Health (UNH)

  • Beat on revenue
  • Crushed on earnings
  • Guides slightly higher on membership growth

Blackrock (BLK)

  • Revenue in line
  • Crushed on earnings

Banks Not Shining

Not even Willie Sutton would be interested in banks today judging from yet another yawn-inducing earnings result from another money center bank.  Bank of America (BAC) beat on earnings, but the stock is edging lower.

It won’t happen today, but we could be looking at new market milestones very soon.

All –Time Highs

  • S&P 2940.91
  • Dow 26,951.81
  • NASDAQ 8,133.30