For Economic Growth What’s More Important- Interest Rates or Liquidity?

We are going to take a look at the old question- Interest Rates vs Liquidity? What’s most important as we look forward to the growth of both the economy and in the stock markets. Let’s get right into it. 

Hello, this is Bob Gray for Simple Econ. Today, we're going to take a quick look at the old question. Interest rates versus liquidity. What's most important as we look forward to growth in both the economy and in the stock markets? Let's get right into it.

And again, we're going to talk about the Federal Reserve System today and whether it's interest rates or liquidity or a combination of both that affects the markets, we've heard a lot of talk about this. There's been a lot of noise about it for the last seven or eight months especially in last December when the Fed rate hike caused the stock market to drop considerably and get pretty erratic for a few weeks there. And again, you got to remember that the news services are really out there to scare you because that way you'll pay attention and listen and that helps their ratings which is their business model is collecting an audience to sell to advertisers.

So they use fear and a lot of noise to get your attention. And they said the Fed shouldn't raise rates, then that others said they should raise the rates, and that they needed to raise them so that they would have some bullets in their gun if we went into another recession, and a lot of people said, "Oh the president didn't say anything about the Federal Reserve and no one else should there such enlightened group of people that we should never ever say they are totally independent." And of course every president and all the news people for years have always commented on the Fed and whether they were doing it right or not. And I'm not here just to talk about whether they're doing it right or not, I'm just here to talk about the effects their decision making has on the economy.

And if you look back over time and this goes back to actually 1954, this graph on the top and you can see the green line is the real GDP here in the United States, the red line is the federal funds rate. And so I think it is always a dual fear because raising the rates too quickly and at the same time reducing liquidity which is the normal procedure and precursor to a recession historically. This time there's a new twist to it all and that's normalizing a very bloated federal balance sheet at the very same time as lowering or raising interest rates.

And this is a first for the U.S. and the Fed and we all knew would have to start. And so far there's really been no negligible effect of reducing that balance sheet, but it's something we need to keep our eye on. But as you can see by looking at the graph, every time that the red line goes up, the green line goes down. And so the interest rate and liquidity does have an impact on the markets, and keeping the rates down helps the markets move forward at a good clip, especially when there's some other... they call it a combination of monetary policy and fiscal policy and the fed is monetary policy.

And there's also some impacts from fiscal policy that can be a headwind or a tailwind to an economy. But as you can see, that once the interest rates the Federal Funds rate gets over about four and a half five percent, it definitely has a negative effect on the economy. And anyhow let's go on and look a little bit further at this because you can see last December we had the market went down considerably. You can see we had extreme volatility for a short while based on the VIX and the VIX is a volatility index of the S&P 500.

So anyhow, you can see the average for the last, well since January 2nd of 2004, when they changed their methodology. The average since then has been about 18.35%, and you can see we jumped up almost as high as what, 36 in December and from a relatively stable time period before that. And then we have settled back down into a below volatility for the most part position right now.

But as you can see easily, the volatility went up the markets went down and we have settled back down. And what was happening during that time, as you can see starting in about what, 2009, the Fed started their programs called Quantitative Easing and they had three stages of those. And over those three stages, they printed money or created the money to buy $3.6 trillion of U.S. treasury securities and mortgage backed securities. And they held that money on reserve at the Federal Reserve Bank until the beginning of 2018 as they decided to start normalizing or reducing their balance sheet.

And they sold off last year most of it coming towards the last half of the year about 385 billion of those securities. At the same time, the excess reserves. Now, the excess reserves are money held by the banks at the Federal Reserve Bank. And since 2010, actually they've gotten paid whatever the Fed funds rate is by the Federal Reserve Bank to keep that money there. That savings money, that excess money that the banks have on hand, and that's money that can be lent through the banking system into the economy to help build the economy.

So it's the same time that the Fed sold $385 billion in securities, the excess reserves declined by 484 billion which means that money went into the economy. Now, I want to note that at the end of the year there was still about 1.6 trillion in excess reserves on deposit at the fed. So liquidity is not an issue in our current economy. But again, you can see they sold 484 billion which takes money out of the economy and they put, or I'm sorry, they put 484 billion of excess reserves into the economy through the banking system. At the same time they took 385 billion out to wipe the securities that they had bought off their books, which equals of 99 billion of additional liquidity added to the U.S. economy.

And still remember there's 1.6 trillion still there. So that means we do not have a liquidity issue in our economy. But in January 4th, if you remember Fed Powell chairman spoke at a meeting in Atlanta I think it was actually January 4th, yeah January 4th he spoke. And in his speech, he included comments that indicated that the Fed would include market factors in the rate decision making and the balance sheet normalizing processes going forward after recognizing the fear that quickly raising the Fed funds rate injected into the U.S. equity market.

And that became the calming effect which allowed the market to shoot up again and has held the volatility down. Now, since then they have continued to sell off securities and reduce their balance sheet or normalize their balance sheet. And at the same time they have put more money into the economy through the banking system.

And you can see that right now everything's been kind of calm in fact, lately other than a little burst of volatility that went above the average. It's calmed down now till it's in the 15%, 16% range and volatility currently as I'm recording this. But as you can see, a 177 billion of the excess reserves did go into the economy in the first almost five months of this year, and they sold 166 billion of the mortgage backed securities, which still puts an additional $11 billion of liquidity, give or take into our economy.

Now, there's no doubt there's other variables involved in this entire process, there's under other funding sources, international investment, there's other things going on in the economy that helps build business investment and builds our gross domestic product. And the other thing is, interest rates and liquidity cash are both important in my opinion for economic growth. They have to keep the rates at a fair rate to manage inflation at the same time, and we've got to make sure that there's enough liquidity or cash available to go into the marketplace to meet demand for growth.

So it's important to keep on your eye on both as you go forward looking at your investments. And when you hear them talking about this hopefully you'll have a little better understanding of what they're talking about.

As always I appreciate you joining me for this short video on the economy and I'll look forward to talking to you again soon.

And just so you know I have spent the last 52 years speaking to small and large groups, done lots of radio TV and print interviews, I'm always available in the Northwest Illinois area and in the Phoenix area for speaking. Anything on the economy economics, U.S. markets, global markets, and marketing I've spoke on all those many times over the years.

Vanessa Baker
Simple Econ with Bob Gray. First Quarter 2018 Corporate Profits.

 

Simple Econ with Bob Gray. As promised, I'm back for a few minutes to review the first quarter of 2018's corporate profits. Take a quick look at where the U.S. Economy currently stands and what we can expect going forward. Let's get right into it.

Hello. This is SimpleEcon and I am Bob Gray. As promised, I am back for a few minutes to review the first quarter of 2018's corporate profits, take a quick look at where the US economy currently stands and what we can expect going forward. Let's get right into it.

Overall, the US economy is performing quite well. But it is hard to tell this most of the time as there's far more noise out there today than common sense. The talking heads need to fill time to separate the commercials, so they often dwell on a single data point at a specific date and time or point in time. However, the economy and markets are not made up of single data points, but millions of global data points, decisions, and trades made globally, along with computer algorithm that turn the data into overall trends. And it's overall trends that must be paid attention to. The rest is just noise that sometimes can and most likely will drive you crazy.

On top of that, you add the proliferation of what I will call the prattling purveyors of pessimism. They have also in the past been referred to as "but monkeys". I'm talking about those who use the qualifying word but with everything they say, as they want you to carry the burden of fear everywhere you go. You can look and listen for them everywhere. They say things like the US economy is currently growing at its fastest pace in a decade, but it won't last forever. Well, guess what? Nothing lasts forever. Right now I would like to focus on just a few of the key trends that are important to understanding what is going on in the US and what it says about the most likely near-term future.

First, the economy is growing at a very strong pace. The Advance Report of Real Quarter over Quarter GDP for the second quarter of 2018 came in at a 4.1% growth rate. That is a great quarter. The second quarter was also the eighth straight quarter of year over year or comparable real GDP growth. What is fueling the growth? Lower tax rates and deregulation are the two largest drivers of the growth as increased business profits aid GDP in a number of ways.

Business investment grew at a 7.3% annual pace for the quarter, which is about three times the average since the last recession ended. The business tax cuts, along with the immediate expensing of capital items have made it more profitable for businesses to invest in the United States. Business investment increases productivity, which in turn increases wages and standard of living. The pace of stronger growth continues while inflation has remained moderate at 2.3%. Consumer spending rose by 4% due to higher employment, wage increases, and tax cuts, which combined, puts more money in their pockets. Net exports increased 1.1%. Some say it is due to increased exports to get ahead of potential upcoming tariffs.

But at the same time, inventories reduced GDP in the last quarter about the same 1.1%, which should increase it in the third quarter as businesses move to build and restock low and sold out inventories. Core real GDP, which is also called final sales to private domestic purchasers grew at a 4.3% pace which is even greater than the GDP growth and is up 3.2% in the past year. This indicates that the underlying economy is even stronger.

Initial employment claims for the first weeks in July remained at record lows, indicating no adverse effects yet from the ongoing tariff negotiations. The consumer confidence index for this July is 127.4, another leading indicator of strong economic growth. There is no doubt that the US economy is the strongest it has been in a decade.

Now to the stock markets. We all know that markets are fueled by profits. The reason to invest in stocks is to share in the profits and growth of the companies whose shares you purchase. First of all, take a look at the S&P 500 which is a solid indicator of what has been happening in the markets. Actual year over year quarter one 2018 profits were up 25% and actual revenue growth was up 8.4%. In moving to the second quarter of 2018, with a little over half of the S&P 500 having reported to date, the blended actual reported and estimated profits for the rest yet to report is indicating overall year over year quarterly profit growth of 22.6%, with blended revenue growth at 8.7%.

Moving to market results, we all know that the markets have been flat over the last few months. This is not uncommon in a growing market. As you can see, this is at least the sixth time this has happened over the past nine plus years of this extended up market. Stair stepping up is normal. Markets pause to reflect, look at the different segments of the economy, look for the next market leadership, rotate stocks or segments, and then start moving up again if the potential is there. The markets are still on an uptrend, and based on whose metrics that you want to use, it is still undervalued by around 8 to 10%. And you can see the similarity in the Dow Jones Industrial Average, the NASDAQ and the Russell 2000 and the Vector Vest Composite, an average of around 7,800 symbols.

Finally, a look at the VIX or Volatility Index. The average volatility since 2004 has been around 18.4. Currently the index has been hanging around 14. I expect it to continue to bounce around higher than last year's very low levels due to the ongoing tariff negotiations, political instability during the run-up to the midterm elections, and some disruptions in the technology area that have started to pop up recently. However, in the long run, it will not change the market leadership that technology has provided for many years.

Globally, it is apparent, looking at some random international stock exchange indexes, that the last 12 months have been good around the world. The global theme for the past several years has been one of global convergence as growth was readily apparent everywhere. Now it appears to be turning to one of global divergence, while the US still has plenty of opportunity for growth. However, indicators in Europe are starting to show growth slowing due to debt, regulations and demographics. China's economic indicators are also showing an economy that is starting to grow at a much slower pace. North Korea, Argentina, and Venezuela are just a few countries that are failing or having rough economic times. Iran is struggling economically and their currency value has been declining since the first of the year, and has lost 20% of its value just in the last few weeks. The Iranian rial is now trading on the black market at 119,000 rials to one US dollar.

Going forward, expect continued positive moves on the US economy. The ISM surveys for June were strong indicators of further growth as the manufacturing index was 60.2 and the non-manufacturing or the service index was at 59.1. Expect similar results this week when the July indexes are reported. The jobs report due on April 3rd should be another strong indicator of continued employment and economic growth. The Federal Reserve Board meets this week and will release their current view of the economy. They are not expected to raise rates this week, however. They are expected to raise the Fed funds rate from 1.75 to 2% at their September meeting and then one more time this year, most likely in December. All is consistent with strong economic growth.

Finally, contrary to what many believe, it is all of us that make the US economy grow and has made it the greatest economic engine in the world. When Americans are both allowed and encouraged to facilitate dynamic growth, our individual and collaborative spirit, ingenuity, entrepreneurial spirit and energy makes anything possible. And it is up to us, and only us, to keep it moving forward.

Thanks for taking a few minutes of your time to watch this short video. I will be back when something changes to explain the what and why and how it affects us all going forward. In the meantime, please be well.

 

Simpleecon Release on 4-30-18

Full Transcript:

Hello, I am Bob Gray, and this is Simple Econ. It has been a wild ride as of late. The noise levels are far exceeding the common sense levels, and that has the markets very volatile as they are currently guided by fear and fear alone. Let's take a lot at what is really going on in the markets and our economy. 

There is no doubt that fear has taken hold of the U.S. markets. Volatility reigns supreme as there is fear of trade wars, fear of dubious tech companies profiting off of personal data as if that was not really common knowledge, fear of well-intentioned government regulations beginning to choke the entrepreneurial spirit, growth, and profits of the technology sector, a sector that has been a major part of both the U.S. job growth and the U.S. economic growth over the last 30 plus years and especially through the recovery from the Great Recession. 

The U.S. tech sector is a major part of the U.S. economy and represents about a third of the market value of the S&P 500, and that does not even include the trillions of dollars a private investor, be it individual, small consortiums, hedge funds, private equity firms, pension funds, sovereign wealth funds, money piling into private equity ownership of privately held tech firms along with more and more privately held firms in other areas of the economy. 

The intellectual property of all these companies represent the global leadership in what will become an even faster growing growth engine for the U.S. economy. Remember, it was not that long ago that volatility first spiked up over concerns of a nuclear war with North Korea. 

As volatile as the markets have seemed over the quarter, we're still experiencing below average volatility when you look at the VIX or the Volatility Index, which is called the VIX. 

Let's take a very quick look at what is going on with each of these fears. 

First, trade wars. Yes, there is a lot of negotiating going on around the world: NAFTA, China, Britain, France, European Union, South Korea. The negotiations have a lot of negative story being posted every day about all the U.S. companies that could, (could being the key word), hurt if negotiations were not successful. But this is also true with the other companies and governments that we are negotiating with, and remember, the U.S. buys more from most of these countries than we sell to them, so who is more dependent on who in these negotiations? 

Of course, the U.S. wants to keep free trade going around the world as it is in all of our interest to do so as long as it is truly free and fair to all. The main issue with China is the theft of U.S. intellectual property. This is no secret and has been going on for a very long time. They know it, and we know it. It is the best interest of all to work these issues out, and, as all have a stake in it, my guess is it will be worked out faster than we think it will. 

Tech companies most likely will see more regulation, but the recently released numbers from Facebook showed an incredible increase in people joining Facebook and using the product, which increases the value and price of advertising on Facebook, which increases their sales and profits. 

Now to leadership in the markets. Earnings and the ability to share in the growth and earnings of various companies is the reason why anyone bothers to do all this work around trading in the U.S. and global equity, debt, currency, and commodity markets. The S&P 500 companies were expected to see a 17.3% earning growth rate. If a 17.3% or higher growth rate is realized, it will mark the highest earnings growth rate since a 19 and a half percent rate in quarter one, 2011. 

Sales for these companies has also been trending higher over the last year as the economy has grown. This makes it easier for companies to increase earnings, and it is a whole lot better for all concerned to deal with more sales than increasing profits totally by managing the PNL. 

Manufacturing and service companies are all showing strong growth through the ISM surveys. Wages are growing, consumption is holding up, and business investment is increasing. There's a lot of fear about running out of people to hire, but we still have people entering the workforce from immigration, aging in, or coming off the sidelines to participate. 

Since business investment is finally showing growth, this will help the economy grow by increasing productivity, which has been slow to flat for the last couple of years. Increasing productivity takes the pressure off of employment growth while increasing overall economic growth. 

The U.S. economy still has a couple more quarters of decent to strong economic growth left in it until it starts going comparable against the last three quarters strong growth, but business is used to always going comparable against past sales and profits. The American business world, whether mega corporate or small business, goes to work every day to improve and beat the comps. That is not going to change. There is so much positive going on in our economy and innovating ideas and products coming down the line. The moments in time might slow it down at times but not stop it. 

Thanks for taking a few minutes of your time to watch this short video. I will be back when something changes or, at the least, toward the ends of the earnings reporting season. Be well. 

Vanessa Baker
What is Going on with the Stock Market?
Feb 8, 2018 Market Statement.jpg

Answering the question "Is the Stock Market falling or correcting?" February 8, 2018

Bob Gray: Hello. This is Bob Gray for Simple Econ, and I'd like to talk  a little bit about the question of the day, is the stock market falling or is it correcting? My opinion, and I feel pretty strongly about this that it is just a good old-fashioned correction. There's several reasons why this is going on. Probably, the first being just time to take some profits and maybe look at your rotation in and out of certain segments of the market, because it's been a long time, probably 14 months or so, since we've had any kind of a pullback or correction. 

Corrections actually are a sign of strength. The market's just doing a little cleansing before they continue to move up. I do not think we're in an all-out fall, because it's very simple, and I'm going to go through the reasons why over the next few slides. So bear with me and let's move on. Obviously, we all know what's happened over the last few days. The Dow has dropped. So has the S&P, the Nasdaq, and even the broader market of some 8,000 stocks, and it's even starting to take some of the other countries with us, because as the US economy goes, so does the rest of the world's economy generally. But as you can see there below, there are 50-day averages, which is the blue line that goes across them, but the 200-day moving averages are still well above. 

And my feeling is that they will start to look for a bottom here soon and start turning back up. However, it's not going to be a shot right back up like we've just experienced. The volatility has increased dramatically, obviously, over the last three days, and I expect to see the volatility remain with us, albeit not quite this volatile, but the market should continue to start to move back up and probably end up with a fairly decent year somewhere in the seven to 10% increase in the markets. The biggest issue though is concern over whether the Fed will increase the interest rates too many times this year or too fast, which could slow economic growth, and they're afraid it'll affect the profits of other companies, too, because they have to pay more for the money they borrow.

But the Fed's been very honest and open over this process. They say they're going to raise it two to four times this year. They're probably going to raise it here in about six weeks their first one for the year, because pretty much everything that's going on in the US economy indicates the rates should go up, and it would be a positive thing because it indicates further strength in the economy and further expected growth in the economy. Like I said, the next one will possibly come in about ... The first one for the year will come in about six weeks, which will only take us up to about 1.75%. By the end of the year, we should all probably be somewhere around 2.5% interest rates, which is still not a high interest rate.

The key thing that generally people fear when the interest rates start going up is a reduction of liquidity in the system, as the Fed starts to pay back the money they've printed over the years. But right now, as you can see, excess bank reserves on deposit at the Federal Reserve Bank are still over $2 trillion as of the end of January. So that's a substantial amount of money, and that money is ready here to be lent out, whenever the banks feel ready to start lending again at a faster rate. The banks currently earn interest on this money while it sits at the Federal Reserve, and they're earning, like, right now, 1.5%.

So, they're really not in a rush to lend it out. And as rates rise, it obviously becomes more advantageous and profitable for banks to start loaning the money. Right now, the earnings, which is the key reason why we buy stocks and is to share in the earnings and growth of the companies of the stocks we buy. And as of today or as of last Friday, 50% of the S&P 500 stocks have reported their actual results for the fourth quarter of 2017. 75% so far have reported actual earnings per share above what was estimated, and their blendings earning growth rate is at 13.5%, and earnings for all of 2018 are expected to grow in double digits, partially because of the income tax reform, but also because of sales.

And 80%, which is a very high number, are reporting actual sales above estimates, and we haven't seen a strong sales growth in, well, actually, since the beginning of the Great Recession. So this is a very positive sign overall for the economy and the markets. The blended sales growth right now is at 7.5%, and if that continues, that will be a very, very strong reporting season. And like I said earlier, the share growth or earnings per share are actually expected to continue to rise to the fourth quarter of 2018, and it shows a little decline in the first quarter of 19, which is, generally, the first quarters are a little lighter, but we do not expect the first quarter of 28 or 2018 to be light.

We expect a continued growth there. Good economic news continues. The Purchasing Managers Index, which is probably the most reliable index of what's going on in manufacturing in the United States. It's at currently at 59.1%. The key ones though are the Production and the New Orders Index, which are up in the mid-60s, which are very, very strong numbers. Employment Index continues at 54.2%. And remember, any number above 50 indicates growth, so the higher it goes over 50, actually, the more growth we can expect. And then the service industry or the Non-Manufacturing Index from the same organization, the Institute of Supply Management, is at 59.9%, which is the highest reading since 2005.

And again, you look at the business activity in the New Orders', very, very strong, as is the Employment Index in the service industry. And again, all numbers above 50 indicate growth. If you look at personal income in the united states, total earnings are up 4.3%, which is a very, very strong number, and average hourly earnings for the last 12 months are up 2.9%, which is the largest 12-month increase since just prior to the start of the Great Recession. There's also plenty of other positives for America. The Home Builder's Index is that a 72, which is just off an 18-year high, which was a month or two ago. Auto sales continue to be strong in the United States, although expected, since a lot of people have bought new cars over the last few years, to start to slow down a little bit, but they're still going at a very strong pace.

And the Fed's Index of Industrial Production is up 2.3% in 2017, and December's production was the highest in 10 years, all very positive signs for the economy. And because of that, you can see the GDP now, which is a forecasting program put together by the Federal Reserve Bank of Atlanta, and it's showing first quarter 2018 gross domestic product through February first of 2018 growing at a 5.4% rate. Now, no one expects that to continue, but it does look like we could end up with a 3.5 to 4% growth rate in the first quarter of 2018, which is extremely strong, and would give us a four straight quarters of very, very strong growth in our US economy.

And with that, the stock market should continue to go up, as profits go up, and as sales go up. Everything's looking good in the economy and all these give every reason to believe that this is nothing but a little slight correction, and things will start be moving forward. Thank you very much, and I will be back the next time I think there's a major change in the market forecast.

Vanessa BakerComment
SimpleEcon US Stock Market 10-31-2017

Bob Gray:

Hello. I'm Bob Gray and this is SimpleEcon. Today we're going to take a brief look at what continues to drive our stock markets up and the puzzle behind why.

If we take a look at the Dow and the S&P 500, the NASDAQ and the broader market of some 8000 symbols, you can see very easily that they're all at or near their all time highs. This is based on last Friday's close on October 27th. The markets are doing well. The reason why? Profits are doing well. That is it. The S&P 500, third quarter '17 earnings report to date, 55% of reported actual results. 76% of those are reporting actual EPS or earnings per share above estimates. Aggregate earnings are 4.7% above estimates. 67% are reporting sales above estimates, which is becoming stronger because it hasn't been that way much over the last eight years. The profits were good because the P&Ls were managed but the sales weren't driving the profits. Aggregate sales are 1.5% above estimates now. All the above reporting numbers are above their five year averages. 

As you can see, the average per share of the S&P 500 has been very strong. The quarter three '17 is actually, as you can see here, has been revised up to probably another high of $33.75 per share and the volatility's declining. This is from the VIX. It's traded in the Merc here in Chicago. It's the futures market on S&P 500 volatility index.

There's always issues to deal with as we look at the markets. We know that the fed is probably going to raise rates in December and that's got a lot of people pouting and worried about it and everything, worrying if there's going to be a liquidity issue, there are things that are going to fall apart. But it's not. There's plenty of liquidity in the markets. 

Actually the [inaudible 00:02:21] banks have excess reserves on deposit at the Fed of almost $2.2 trillion dollars right now. This is all money that can be lent out. The banks currently earn interest on this money by leaving it there. So they don't have to lend it. But as rates rise it will become more advantageous and attractive for the banks to start loaning the money. So there's going to be plenty of liquidity for a long time into the future. 

Always another issue we have to deal with is geopolitical problems. We also have global economic issues, one country's up, another country's down. Europe's starting to tighten up a little bit. There's a lot of problems in Europe. China's a little slower but they're hanging in there. India's doing great. Some of the countries in Latin America are starting to really come around, Argentina and Chile and a few others. 

There's also natural disasters but we always have them and we always will have them. You can see or I'll show you later that even with all the hurricanes, it really hasn't been an issue to corporate profits and to the stock market over the last 60 days. 

Then they also were saying all the time, hey, they're troubled finding enough qualified workers. Well it's going to be very difficult to move forward to build revenue because we won't have all the workers we need. But still there's around 140,000 people aging or emigrating into our workforce every month. There's also around 1.6 million people considered marginally attached to the workforce, which means that they are part-time, they're going to school, they're not really looking for a job now but they also when the time comes can come back into the workforce. 

Now we want to take a look at a lot of the positive news that's out are that's helping build the markets and the economy. The good news the Purchasing Managers Index, US Manufacturing is 60.8% and the Production Index is 62.2%, the New Orders Index is 64.6% and the Employment Index is 60.3%. Number above 50% indicate growth. These are excellent numbers. The Institute for Supply Managements PMI Indexes are considered one of the more reliable indexes on what's going on in the US economy. They also have a service sector index which right now has a reading of 59.8% with a business activity index of 61.3%, a New Orders Index of 63% and an Employment Index of 56.8%. As with the Manufacturing numbers above 50% indicate growth. These are very solid numbers.

NFIB Small Business Optimum Index is just about at it's all time high since before the great recession. Small businesses becoming very excited, especially with the businesses getting good and especially with a chance of tax reform coming that will also be a big boon to small businesses.

Other good economic news, new ... Commerce Department reported last week, new homes jumped 18.9% in September to a seasonally adjusted annual rate of 667,000. That's the most in a decade. The University of Michigan Consumer Sentiment Index is 101.1. That is up due a gain in consumer's view of current and future economic conditions. Again a very strong number.

Retail sales year to date are up 4.4%, which is another good strong indicator. As you can see, GDP growth which is especially important to the overall economy and improving what's happening in standard of living because productivity and workforce growth along with a few other key indicators have been signaling around 3% annualized growth for third quarter '17. Last Friday the government announced our third quarter '17 first reading of Gross Domestic Product was 3%. That's including three hurricanes going on in that quarter. The quarter before GDP was 3.1%. That's the strongest two quarters in a row in several years. Productivity and job growth lead to standard of living growth. It's a simple fact.

So we should all continue to cheer on GDP. That is the most important thing as the country continues to grow, the tax reform comes in and companies can be more competitive globally. It will help grow GDP and at the same time grow standard of living here in the United States for all employees and all workers and everybody else. And at the same time, it will continue to send the profits up.

Thanks for joining me today to take this brief look at the stock market. I'll be back if there's any major changes and I'll also be back from time to time with other information on what's going on with the US and the global economies. Have a great day.

Vanessa Baker