You Ain’t Seen Nothin’ Yet…

"It is not necessary to do extraordinary things to get extraordinary results." – Warren Buffett

Over the last week or so market records have been thrown around like pennies at a wishing well. 

But when you consider that the Dow Jones recorded five days of consecutive record high closes, the sum total upward gain from which was 124 points, it’s not that interesting.

What is interesting is the Small Biz Optimism Index hitting a 35-year high. 

Here’s a little independent commentary to accompany the chart:

Not since the roaring Reagan economy has small business optimism been as high as it was in November's data.  This according to the National Federation of Independent Business (NFIB) Index of Small Business Optimism, released this week.

The President of the NFIB commented in the report: "We haven’t seen this kind of optimism in 34 years, and we’ve seen it only once in the 44 years that NFIB has been conducting this research."

He added: "Small business owners are exuberant about the economy, and they are ready to lead the U.S. economy in a period of robust growth."

Maybe remaining fearful of 2008 and 2009 is no longer a logical conclusion. It’s also becoming exorbitantly expensive in terms of missed opportunities / gains.  

It's Official

While the bullish sentiment from the American Association of Individual Investors (AAII) finally saw a bounce this week following a more than 17,000 point Down Jones Index rally from the lows of 2009, the AAII has remained at record lows in terms of bullishness throughout that eight plus year period.

This is now three years running where the bulls have not owned 50% of the market. 

And if you think this "bounce" is significant, don't. 

I’ll say it again: "Give me a month of red ink and I will show you a crowd in the bunkers, and bulls in the 20's again." 

Meanwhile...

While most yawn as markets continue to churn upward, along with earnings the latest weekly stats showing those forward projections continue to mount; providing a solid base for any hoped for correction as 2018 dawns:

Here is the latest Thomson Reuters data:

• Fwd 4-qtr estimate: $142.54
• PE ratio: 18.6x
• PEG ratio: 1.7x
• S&P 500 earnings yield: 5.38%
• Year-over-year growth of the forward estimate: +10.92% vs. last week's +10.79%

Needless to say, these numbers remain solid and expansive, especially in a 2.40% to 2.50% 10-year bond world.

By the way, there is zero assumption in this data for any benefit from US tax cuts.  

Summary

Make no mistake, folks; the rare US Barbell Economy is upon us and is set to unfold for the next 30+ years.

Sit back and fasten your seat belts. It's going to be a wild ride.  And there will, of course, be lots of stops along the way up this mountain – some will feel like the world is ending.

In the words of Bachman-Turner Overdrive (when I was a kid): "You ain't seen nothin' yet..." 

Long-term thinking always wins out over short-term trading, and worrying about the next setback sells lots of ads but makes almost no money for you.