Economic Growth Is Driving Stock Prices Higher.

Yes GDP Can Grow at 4 Percent

It has been nearly a decade since we had real economic growth in this economy. In fact, it has been nearly two decades. Tax reform and deregulation really can drive growth and it can in a big way. One percent in GDP growth is just $170 billion more in production per year. Do you really believe the economy is a two percent economy forever? I don’t. I find it hard to believe the economy can’t grow at 3 or 4 or even 5 percent again. Adding $170 billion to the economy doesn’t seem all that hard of a task, in the grand scheme of a $17 trillion economy.

Stock Prices Continue To Grind Higher

The S&P just continues to move higher, after breaking out late last week. Some investors seem to be scratching their head’s wondering just what it is going on? How can the market still be going up? It is called growth. Growth is a fantastic thing, and as long as the economy can continue to expand and earnings can continue to grow, the stock market can continue to rise.

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 Improving Economy

Take a look at the ISM Purchasing Manager’s Index…It looks like the highest reading in a decade.
ISM Purchasing Managers Index Chart

ISM Purchasing Managers Index data by YCharts

ISM Non-Manufacturing Index…
ISM Non-Manufacturing Index Chart

ISM Non-Manufacturing Index data by YCharts

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It Is About GDP Growth

Just take a look the reading of GDPNow for the third quarter from the Atlanta Fed stands at 2.8 percent.

If the economy keeps improving, then the markets will continue to rise, There has been a definite turn in the economy that occurred in the second half of 2016.
US Real GDP Growth Chart

US Real GDP Growth data by YCharts

There are other reasons why. Look at the growth in revenue and expected growth of the FANG’s, it tells the story.
FB Revenue (TTM) Chart

FB Revenue (TTM) data by YCharts

It Earnings

Does one need more evidence than the following chart…
S&P 500 Earnings Per Share TTM Chart

S&P 500 Earnings Per Share TTM data by YCharts

’nuff said.

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Disclaimer:

Michael Kramer and the Clients of Mott Capital own shares of GOOGL and NFLX

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.