The “Heat Map”

March 28th, 2017

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- (very favorable). Favorable activity in the housing market continues to support growth in the level of spending. This category’s grade will improve if and when the Trump legislation is passed.

THE FED AND ITS POLICIES: This factor is rated C-. The FED’s Open Market Committee met last week and raised raise rates .25% as expected.

BUSINESS PROFITABILITY: This factor’s grade is raised to a B (above average). Fourth-quarter earnings are on pace to grow by 8.4%, according to Thomson Reuters I/B/E/S, nearly double the 4.3% gain reported during the third. And analysts see earnings advancing at a double-digit clip during 2017’s first two quarters

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 3. These risks deserve our ongoing attention.

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