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Economy roars ahead despite consumer pessimism

The US economy is accelerating impressively, marked by increased holiday spending and surpassing expectations in housing starts. Inflation and interest rates are on a downward trend, while the job market shows robust health. Despite higher debt, the continued employment stability seems to help consumers manage. Major uncertainties have faded, but potential oil supply disruptions and looming debt ceiling debates remain as minor concerns. The market, reflecting the economy’s strength looks to be in early stages of a new bull market.  Contrarily, consumer perception of the economy remains pessimistic, suggesting potential for growth as this perception aligns with the improving economic reality.

The latest survey data reveals a significant leap in holiday spending per person, up by 31% to $1,300. Additionally, 18% of consumers plan to spend more, the highest percentage since 2019. Housing market data is equally strong, with housing starts reaching 1.56 million, well above the 1.36 million forecasted. The dip in interest rates is enticing buyers, especially with a limited housing supply. However, building permits were slightly lower than expected, at 1.46 million.

In the stock market, notable movements include a 1.4% rise in Amgen’s stock following an upgrade, a 5.1% surge in Sunnova shares on favorable forecasts, and a more than 5% increase for Arvinas after an analyst upgrade.  The optimism in the stock market is in a tremendously positive trajectory.

Key Insights:

  • The US economy is thriving with significant growth in holiday spending and housing starts.
  • Despite robust economic indicators, consumer sentiment of economy remains largely negative.
  • There’s a notable gap between the positive economic reality and the public’s perception.
  • Market optimism hints at the potential for further economic expansion as consumer sentiment improves.

With the current economic landscape, growth stocks are increasingly attractive as an investment strategy. The focus will be on identifying opportunities during market pullbacks, with risk management remaining crucial after the recent strong market performance. The emergence of a bull market suggests it’s time to strategically position investments to capitalize on this momentum.

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