Despite Negative Media, There’s Much to Be Optimistic About

I’m sure most of my readers have figured out by now that the mainstream media is determined to cast as negative a light as they can on President Trump and everything he does, no matter what. Along that line, they have tried their best to characterize this economy as pathetic at best, and assure us that a recession is just around the corner.

While the booming December jobs report on January 4, showing a whopping 312,000 new jobs last month, has dealt the gloom-and-doom crowd a pause, they will not let up in telling us the economy is going into the dumps. Despite that, there’s a lot to be optimistic about as we kick off the New Year. Let’s hit some of the positive highlights today, starting with the stock markets.

This month, the S&P 500 Index is off to its best start in years, but this is on the heels of the worst year for stocks since 2008, thanks to the mini-crash in the 4Q. The trifecta of crashing oil prices, confusion from the Fed and growing trade war issues with China all pushed equities lower by 14% during the usually bullish 4Q last year. December was the worst month of the year for the first time, according to data going back to 1950.

The stock market plunge in the 4Q wiped out all of the gains for 2018. No wonder investors are in a gloomy mood! But here’s the catch: There’s still a lot of good news that investors are not hearing.

Consider the following regarding the stock markets:

• Since Fed Chair Jerome Powell used the word “patient” again last week when referring to the Fed’s approach to hiking interest rates, stocks rose five straight days. There had been a big disconnect between what the Fed was saying and what markets believed. That seems to have been alleviated now.
• Oil prices have stabilized after crashing in the 4Q of 2018. OPEC is doing what it can to reduce oil production, and crude prices have rebounded this month.
• Trade talks with China are continuing, and there’s a good chance there could be some type of deal over the coming weeks or months, as pressure is mounting on both sides to find a resolution.
• Following the 2.7% selloff in the S&P 500 on December 24, stocks gained more than 10% in 10 days. You have to go back to July 2009 to find the last time stocks were up that much in 10 days.
• Stock valuations have dropped significantly, and historically this has been a bullish event. It remains to be seen, of course, if the recent downward correction is over.
• The S&P 500 was up nearly 3% after the first five trading days in 2019. Since 1950, when the S&P 500 was up more than 1.1% after the first five days of the year, each of those years closed higher 23 out of 23 times before 2018. Yes, 2018 ended that incredible streak (along with several other tried and true historical market records). Still, it has been a very good start so far in 2019, which may signal a strong year.

I’ll end with one last chart that is very encouraging. This chart shows that after a midterm election year low, as we saw last month, the S&P 500 has been higher a year later every time going back to 1950. The S&P 500 low in 2018 was December 24, and history suggests there’s a good chance stocks will be higher by the same time this year. Take a look:

Conclusions: Yes, there is a lot to be negative about today, and the mainstream media is committed to focusing on it day after day. They want us to forget that the economy is performing better today than in years.

There’s a lot of good news out there that we should not ignore. The economy is strong; corporate profits remain healthy, which is good for stock prices overall. There’s no recession in sight despite what the media tells us over and over. The risks of a trade war with China are decreasing, and a new trade deal may be forthcoming.

I remain optimistic that the economy will remain strong in 2019. Sure, a recession is coming, but I don’t believe it will be this year. I am also optimistic that stocks will have a good year in 2019, but the market will almost certainly remain volatile. We just have to get used to it.

Most importantly, we have to understand that the mainstream media will paint everything as negative as possible as long as President Trump remains in office. Ignore them!

Finally, I know that some of you think I’m too optimistic. There will be a time to get really negative – I just don’t think we’re there yet. When we get there, I will be bearish with the best of them.

I hope your year is off to a good start!