The stars seem to be aligning for stock market optimists and even if we’re jumping the gun by a few weeks, it looks highly likely that by the end of December we’ll beat the 6000 level on the S&P/ASX 200 Index, if it doesn’t happen sooner. And Wall Street overnight did no harm to my case for positivity towards stocks.

Here are the key take-outs, data-wise, overnight in the US:

• Apple earnings shocked the market on the high side and gave strong guidance.
• The Nasdaq ripped into record high territory.
• Jobs growth was 261,000 in October, below the 310,000 tipped but there are questions about these numbers post-hurricanes. And, if anything, the less-than-expected number might mean slower interest rate rises ahead for the USA. Andrew Chamberlain, chief economist at Glassdoor, said the BLS report “underlines the strength in the economy,” adding that “the labor market is on an upward trajectory and that’s good for workers.” (CNBC)
• In September, the economy gained 18,000 jobs, according to a revised estimate released Friday, which was better than the Bureau of Labor Statistics initial estimate that said employers cut 33,000 jobs in September. These numbers were all hurricane affected.
• US earnings in the first quarter and for the current one are expected to be on the rise and better than expected. Earnings look up 7% the first quarter, going to estimates for this quarter of 11.7% and that’s why stock prices keep going up on Wall Street and on the Nasdaq.

Back home, in case you missed it, the Index rose to a two and a half year high, finishing at 5960, up 28 points (or 0.5%) for the day and 1% for the week.

Not a bad effort, considering the bank smarties didn’t give the NAB a tick for its good annual profit. Oddly, losing 6,000 jobs and making a substantial investment commitment in technology didn’t enthuse the market. And you wonder why our tech sector is so paper-thin!

Fairfax says Morgan Stanley’s bank experts think the NAB is a $27.70 stock, compared to its end price today of $31.79. However, the good guys and girls at Credit Suisse see it as a $34 stock in the not-too-distant future. I’m punting with the CS team because my economic view of 2018 remains strong.

Helping the market this week were two good news Trump stories. First, the tax plan was released and that didn’t spook Wall Street. And second, we learnt that the President has cancelled the ticket of Janet Yellen as Fed boss, preferring US Federal Reserve Governor, Jerome Powell, known to his buddies as Jay. This guy might be a lighter financial regulator compared to Yellen and is seen as having a slow hand when it comes to interest rate rises, but he’s still seen as a ‘safe pair of hands’.

What I liked about this week was the promising reports of NAB and Woolies, as they’re significant bellwhether stocks for the economy. No one is surprised that Myer is still struggling and its 7% loss over the week makes you think a Solly Lew hurricane will soon blow some changes at the former respected retailer.

I liked the showing of energy and mining stocks this week, which adds to the belief that a world economy growing in sync should be good for stuff that comes out of the ground, which is our long suit.

The only negative from this development was the strengthening of our damn currency, which did revisit 77 US cents this week. I want our dollar to dip to about 72 US cents but we might have to wait for a US interest rate rise and a signed as well as sealed tax plan passed by Congress before the greenback’s spiking pushes our dollar down. That said, I might be denied my dollar wish!

What I liked

• Oil hit a two-year high this week and I’m not surprised, as Macquarie’s Martin Lakos told us earlier this week that their reconnaissance showed oil silos in China were a lot lower than expected and this country is a huge oil importer.
• The Federal Chamber of Automotive Industries (FCAI), says new motor vehicle sales totaled 95,763 in October, up 2.6% on a year ago and the highest for an October month.
• The weekly ANZ/Roy Morgan consumer confidence rating rose by 0.1% last week to 113.4, after rising 0.8% in the prior week. Confidence is above the average of 113.2 since 2014. The estimate of family finances hit a 4-month high.
• Private sector credit rose by 0.3% in September, after a 0.5% rise in August. Annual credit growth remained at 5.4% for the fourth straight month.
• The CBA Purchasing Manager’s Index for the services sector fell from 53.2 in September to 53.0 in October. The index remains over 50, signifying expansion of the services sector.
• The CBA/Markit Manufacturing index rose from 53.8 to 55.5 in October. The AIG manufacturing index fell 3.1 points to 51.1 in October.
• The CoreLogic Home Value Index of capital city home prices was unchanged in October to stand 7% higher over the year. The national home price index was also flat in October to be up 6.6% over the year. It was the smallest annual change in national prices in nine months but that’s what regulators wanted.
• Our trade surplus rose from $873 million in August (previous reported as $989 million) to $1,745 million in September. The rolling 12-month surplus rose from $16.2 billion to a record $19.0 billion. Exports to China hit a record $100.95 billion in the year to September.
• Approvals by local councils to build new homes rose by 1.5% in September, after rising 0.1% in August. In trend terms, approvals rose for the eighth straight month, up by 1.8%.
• The value of commercial building approvals rose by 1% in trend terms to a record $4.16 billion. Approvals are up 15.3% on the year.
• The Fed described economic growth as “solid” and core inflation as “soft”. Financial markets believe there’s a 92% chance of a rate hike in December.
• The ISM manufacturing index in the US eased from 60.8 to 58.7 points in October (forecast 59.5) but it’s still expanding. Construction spending rose by 0.3% in September (forecast flat). The ADP series of private payrolls showed that jobs lifted by 235,000 in October (forecast +200,000).
• US Consumer confidence rose from 120.6 to a 17-year high of 125.9 in October (forecast 121.0)
• US personal spending rose by 1% in September (forecast +0.8%), with income up 0.4% as expected.
• The German Dax soared by 1.8% to record highs on Thursday, while European stock markets hit five-month highs on Tuesday.
• The National Bureau of Statistics manufacturing purchasing managers’ index eased from 52.4 to 51.6 in October, while the services sector result eased from 55.4 to 54.3. Any reading above 50 signifies expansion or growth of activity.
• The US tax plan would permanently lower the corporate tax rate to 20%. It would also keep retirement savings plans like the popular 401(k) intact. The plan would also cut mortgage interest deductions in half. Also, it lowers the tax rate on repatriated cash to 12%. (CNBC)

What I didn’t like

• Retail trade was largely flat in September after falling 0.5% in August and falling 0.3% in July. Annual sales growth fell from 2.1% to 1.4% but a lot of this is price discounting so retail might be a less reliable indicator about the economy’s health.
• In seasonally-adjusted terms, new home sales fell by 6.1% in September, after rising by 9.1% in August. Sales are down 25.8% over the year. This could be an unwanted consequence of the bank lending crackdown.
• According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 9 cents last week to 136.4 cents a litre, reflecting the ending of discounting cycles in Sydney, Melbourne and Brisbane. It was the biggest weekly lift in the national petrol price in 13 years of records. (I hope it’s a good sign for the economy that demand is driving higher petrol prices, though a lot of it would be higher international oil prices.)

One BIG dislike

This persistent ‘foreigners’ in our Parliament crisis could potentially derail the improving economy, especially if this ridiculousness coming out of the Government and Labor results in a change of Government or a new election. With Labor in the box seat, according to the polls, we could see a scaling back of investment until the new Government shows up.

Our economy and stock market doesn’t need this constitutional curve ball at these improving times for both the economy and the stock market.

The Week in Review:

• Another doomsday merchant is warning of a market crash! I took a closer look at his theory and offered my view on how long the bull run can last.
• Paul Rickard examined whether the adage “You can’t shrink your way to greatness” holds true for ANZ and gave a definitive answer on whether it’s a ‘buy’ or ‘sell.’
• With Halloween on Tuesday, James Dunn looked at some of the scariest stocks on the market.
• Charlie Aitken talked about why your portfolio needs more direct exposure to China!
• Despite a hard year for retail, Tony Featherstone explained why smart investors will see new opportunities in ‘Fortress’ shopping centre owners.
• In this week’s likes and dislikes were BHP, financial services and a waste management company.
• In Buy, Hold, Sell – What the broker says, ANZ was in the not-so-good books while Blackmore’s got an upgrade to Outperform.
• And in the second Buy, Hold , Sell, brokers upgraded Macquarie Group and Woolworths, while Fairfax copped a downgrade.
• Fabian Bussoletti of AMP Advice answered a reader’s query on their eligibility for the Commonwealth Seniors Health Card after selling a holiday home and Paul Rickard offers investment advice on Woolworths, Cochlear and more.
• Plus, this week’s Professional’s Pick was Reliance Worldwide Corporation, find out why!

Top Stocks – how they fared

 What moved the market?

• The US Markets including the Nasdaq Composite hit a record high
• NAB and ANZ profit reports underwhelmed
• Strong support for base metals, in particular copper and nickel, and a firming oil market
• World stocks set a record 12 months of gains as Europe outpaced the advance on Wall Street
• Sydney’s property prices suffered a quarterly fall as they fell 0.6%. Despite a downturn in values, Sydney home prices are up 74% since the last growth cycle in 2012.
• Australia’s trade surplus increased to $1.75 billion from $873 billion since August
• Donald Trump announced Jerome Powell on Friday as head of the US Central Bank.
• Apple shares rose in after-hours trading after the company issued a strong holiday sales forecast. Apple is on track to become the first company to reach $US1 trillion.

Calls of the week:

• I called out our Politicians for possibly being the dopiest in the world!
• James Dunn named five of the scariest stocks for Halloween! Find out what they are here.
• The referee who handed out a red card and sent off football’s Patrice Evra (Olympique Marseille) before the game had even started! Is he the new Eric Cantona?

The Week Ahead:

Australia

• Monday November 6 – Job advertisements (October)
• Tuesday November 7 – Reserve Bank Board meeting
• Tuesday November 7 – NAB Business survey (October)
• Thursday November 9 – Housing finance (September)
• Friday November 10 – Statement on Monetary Policy

Overseas

• Tuesday November 7 – JOLTS job openings (September)
• Tuesday November 7 – US Consumer credit (September)
• Wednesday November 8 – China trade (October)
• Thursday November 9 – China inflation (October)
• Friday November 10 – US Consumer sentiment (November)

Food for thought:

“Never spend your money before you have earned it.” Thomas Jefferson

Last week’s TV Roundup

• Are stocks heading towards another ‘level high’? Martin Lakos and Paul Rickard join Peter Switzer to talk about the market and where our economy sits in regards to the US economy (broadcast Monday 30 October 2017).
• What stocks should be swept into the dustpan? And what stocks are good at the moment? Find out what Julia Lee has to share on Switzer TV (broadcast Tuesday 31 October 2017).
• Do you whiten your teeth? If not, you need to jump on the social media bandwagon! HiSmile co-founder Nik Mirkovic joins Switzer TV to discuss the company and its recent and fast growing success (broadcast Tuesday 31 October 2017).
• Small businesses are the heartbeat of the economy and local communities, however they’re doing it tough. Barry Fletcher of American Express urges people to support local businesses as part of the ‘Shop Small’ initiative (broadcast Wednesday 1 November 2017).
• Have the big banks lost customer trust? Former CBA CEO, David Murray, joins Switzer TV to answer this question (broadcast Wednesday 1 November 2017).

Stocks shorted:

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table shows how this has changed compared to the week before.

This week, one of the biggest movers was Ardent Leisure Group (AAD), with its short position decreasing by 1.05%

Charts of the week

Source: Commsec

Source: Commsec

Top 5 most clicked

1. James Dunn: Halloween feature: 5 scary stocks
2. Peter Switzer: Doomsday merchant Tepper warns of market crash! Do we believe him?
3. Charlie Aitken: Why I’m bullish on China
4. Rudi Filapek-Vandyck: Buy, Hold, Sell: What the brokers say
5. Paul Rickard: Can ANZ “shrink to greatness”?

Recent Switzer Super Reports

• Thursday 02 November – China Focus
• Monday 30 October – Halloween spotlight

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.