Blowout Earnings & GDP Moved Markets to New Highs
Thursday night earnings were released by numerous companies. Those numbers boosted the markets and the futures before the open Friday. Some of the companies included big names like Alphabet (GOOGL), Amazon (AMZN), Microsoft (MSFT) and others. Then, Friday morning before the open the GDP was reported at 3.0% and that was the icing on the cake boosting markets to record highs Friday.
Amazon reported 52 cents a share, blowing out Thomson Reuters estimate of 3 cents and adding $6 billion to Jeff Bezos' fortune making him the richest man in America! Amazon Web Services (AWS). the company's cloud business, was its main driver for growth with sales increasing 42%.
There certainly are skeptics about the market's robust run since the results of the Presidential election. Some claim that new accounting methods are boosting performance,
Whatever the case may be for accounting issues, we that the bull has more room to rum and here's why. While the Fed may raise rates in December, the ECB is keeping some level of easing in place, the world world economy is strong and growth is rising, and earnings are good. While rates are moving up, we have said that they can only go so far and predict 4% maximum. The maximum we have selected is because beyond 4%, the USA will bankrupt itself.
Our debt is so high and moving up each second, that interest rates above 3.5% to 4% would create a situation like Greece just went through where the government can’t pay the interest on the debt. So anyone being scared of seeing rates go crazy like in the 1980’s of 16% mortgage loans, we say that it will not happen – it simply can’t.
As Warren Buffet indicated, if rates stay low (and we think that they will) then the markets are well underpriced. We see this bull-run marching on for 2-3 more years absent a major geopolitical black swan event with the S&P now at only 70% of its actual value. Some disagree and say that the market is fully valued. We will see as time marches on.