Date: March 1, 2019

Pullback Over? GDP Report a WOWZA

All week stocks have been in pullback mode but it sure doesn’t feel like it. What is the S&P 500 down from its intra-day peak? Not even 1%. Overnight trading suggests a test of 2019 highs. Again, when the masses have been sitting in so much cash all year, waiting for stocks to go down 5%, 10% and 15%, it provides a strong cushion against such a decline. The slightest bit of weakness continues to be bought, until it isn’t. And then a real pullback will begin.

This slight pause in the major indices hasn’t even touched any short-term determinants of trend. No glaring internal weaknesses. No sector warnings. No nothing. The test will come at the end of the day if stocks are near 2019 highs.

On Thursday, the government announced that Q4 GDP grew by a much better than expected 2.6%. My non-scientific stab in the dark thought it would be much lower. 2.6% with the government shutdown and collapsing retail sales is astonishing. There continues to be widespread underlying strength against pockets of despair in auto loans, credit cards and housing. I keep hearing the naysayers scream about recession coming next month, but they have been saying that since the election of 2016.

It’s really amazing. In my 30 year career, I have watched Reagan, Bush, Clinton, Bush and Obama all preside over varying economies. Almost uniformly, everyone rooted for a strong economy regardless of political persuasion. It’s certainly no secret that I was anything but a fan of Mr. Obama. However, I knew that his success would be my success. For the good of the country and its citizens, we all put politics aside and cheered for economic success as everyone won.

Today, very sadly and pathetically, that’s no longer the case. While I understand 100% how polarized our country is and how much hatred there is for Donald Trump, the country has now stooped to a new level. And I have heard it firsthand. People actually overtly and loudly root for a serious recession so Trump will fail in his reelection bid. That’s seems like treason to me. How could anyone hope for unemployment to rise? For people to lose their homes? Wipe away their savings? Raid their retirement accounts? That is about as despicable and disgusting as it gets.


Paul Schatz, President, Heritage Capital