I know Fed policy is designed to help stocks, but the textbook narrative has yet to play out… money hasn’t come pouring out of stocks and Main Street isn’t jumping in the market at breakneck speed- even the smart money has missed a lot of this rally. Still, bears, shorts and booksellers will whine into the New Year about this being the Fed-induced rally, hinting that investors should stay away. They’ve missed 13,000 points and are the greatest example of pride and ego.
The sad part is they’ve costs millions of would-be investors to miss 13,000 points, too.
If you want to assign reasoning for the rally, begin with the fact our foundation didn’t break even though it was under economic and political assault. Yes, we are far from where we could and should be, but this rally, which began with stocks at absurd lows, is now the American Rally.
See this morning’s report on initial jobless claims at the lowest for current week of the year since 2000.
Last Thursday ’s manufacturing report for the Philadelphia region underscores the amazing good fortune for the nation at the moment. The headline number was a little below consensus, but last months record was unrevised. Moreover, prices paid declined while prices recived increased, hinting at bigger profits margins.
| December Philly Fed Report | Nov | Dec |
| Prices Paid | 17.3 | 14.0 |
| Prices Received | 11.5 | 12.5 |
And a special question on December cost versus 2014 found (mostly) encouraging trends. More than half manufacturers say they increased wages and almost as many said energy prices are lower. The lone negative response going into 2015 is 67% of manufacturers saying healthcare cost is higher.
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| December v 2014Costs | Wages | Energy | Healthcare |
| Higher | 50.8% | 19.4% | 66.7% |
| Same | 42.9% | 32.3% | 27.0% |
| Lower | 6.3% | 48.4% | 6.3% |
At some point, if history is a guide, all that textbook Fed-induced action will happen. We’re talking rotation out of bonds into stocks, Main Street pouring in piles of cash including the milk money and book sellers throwing in the towel with new titles like Dow 40,000 instead of (my last book) Dow 5,000.
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