Stocks today rallied on heavy volume as the Dow moved ahead by 196 points to 21,899. Material and defense stocks led the way.
Brian Wesbury, chief economist at First Trust and honorary member of the Westport Mafia, wrote today that the Atlanta Fed’s “GDP Now” model is pointing to a Q3 GDP growth rate of 3.8% which, if it holds up, will be the fastest quarterly economic growth rate in 3 years. What is helping drive this is regulatory reform, lose monetary policy at the Fed, inventory building and over $2 trillion smackers of excess reserves in the banking system or as I like to say “liquidity with a capital “L”. While tax reform is still up in the air and trade reform remains a risk, the pulse of the economy for now seems to be good.
Meanwhile, the good folks over at BTS Capital are seeing the same thing and reiterated a call on high yield junk bonds citing their proprietary quantitative models which are noting strengthening economic growth, mild inflation and a backdrop of 12% year over year corporate earnings growth. High yield junk bonds are correlated to equity markets and since July of 2016 the Lipper high yield mutual fund index is up 11.44% proving that one man’s junk is another man’s gold.
Boeing and Northrop were selected by the Air Force to compete for the $85 billion Minuteman II replacement contract. The Air Force hopes to choose a design winner in 3 years and begin replacement after that. This replacement program began under the Obama Administration and is part of a three legged stool where by the US rebuilds it’s ICBMs, subs and stealth bombers.