The most under-reported story in global finance remains the growth of the US economy, US corporate earnings, and Wall Street’s year-to-date performance. I realise good news doesn’t generate press ratings or web hits, but on Tuesday night there was again further evidence of the US economic recovery and Wall Street rightly reversed its opening European sentiment-driven losses.

With 70% of US gross domestic product (GDP) being consumer spending, it’s very encouraging to see October retail sales up 0.5% (above the market estimate of 0.3%) on the back of September’s retail sales that rose 1.1%. Interestingly, electronics sales rose 3.7%, which is intriguing because huge short positions remain in US and Australian electronics retailers, including JB Hi-Fi and Harvey Norman.

Also worth noting was the Empire State manufacturing index, which rose for the first time in five months. I continue to believe US GDP forecasts are too pessimistic. Don’t make the mistake of underestimating how important economic recovery momentum in the biggest economy in the world is. The S&P500 is up 0.3% for 2011, but where do you see that written in the financial press or doomsday blogs? Westfield (ASX:WDC) remains my top recommended way of playing this US economic recovery.

Commodities liked the US data, with copper and oil rising. The Aussie dollar again underperformed commodities, which is good for Australian commodity producers. But the biggest move following the US data was the spot price of iron ore, which rose by 5.8% to $146.30t.

I have seen all sorts of excuses from global broker hedge fund desks (who had iron ore targets of $90t) about why the rally in spot iron ore is unconvincing. The simple fact is spot iron ore bounced off the marginal cost of Chinese production ($120t) and is headed back to $145-$150t. The Chinese started restocking low steel mill inventories two weeks ago. There are MASSIVE short positions in pure play iron ore equities and the risks of a violent short squeeze increases daily. Fortescue (FMG), Rio Tinto (RIO) and Atlas Iron (AGO) remain the most leveraged and shorted stocks to rebounding spot iron ore prices. They all remain trading and fundamental ‘buys’, as does BHP Billiton (BHP).

But if there are two stocks you should add to your portfolio right now, it’s these:

Telstra Corporation (ASX:TLS) – Buy

The market remains too bearish on Telstra. Foreign investors continue to increase their weightings in Telstra and the stock also continues to relatively outperform the ASX 200. To me this looks structural and likely to accelerate when Telstra talk to investors and analysts this Friday. I think there is significantly more to come from this stock. The key uncertainties are improving – the NBN Deal, operating trends, dividend, Future Fund overhang cleared. With greater confidence that these uncertainties are improving, coupled with an earnings upgrade cycle, we believe that strong value exists. On this basis we reinforce our strong ‘buy’ rating

Target price: $3.55

Wednesday’s close: $3.17

Commonwealth Bank (ASX:CBA) – Accumulate

Commonwealth Bank of Australia reported a quarterly profit of $1.75 billion this week. At that run rate CBA will either match or most likely exceed fiscal 2011’s record profit, which in turn means CBA’s dividend payout this year will either match or most likely exceed last year’s record payout of 320 cents fully franked. Of course the bank analyst nitpickers can always find some fault with every result, but this result from CBA would be the envy of every bank in the universe right now. CBA is on track to generate a $7 billion profit, has tier-one regulatory capital of 9.85%, and liquid assets of $108 billion. To compare CBA to any European or US bank is simply unfair. This is like comparing a fillet steak to reheated takeaway. I’d be accumulating CBA shares into any further weakness, feeling the $50 technical resistance level will be taken out when the stock goes cum the interim dividend in February.

Target price: $50.80

Wednesday close: $48.62

Another company we have a buy recommendation on is:

Emeco Holdings (ASX:EHL) – Buy

The turnaround at Emeco is now largely complete and the business is positioned to benefit from the growth in demand for rental equipment. Emeco has the scope to recycle $100-150mpa of surplus cash flow into the business for growth and there are clear signs this is occurring. The trajectory in Emeco is clear, with an improving return on equity, strong cash realisation, high levels of production based revenues and further investment in fleet underwriting growth in net tangible assets. We retain our Buy rating on this stock.

Target price: $1.39

Wednesday’s close: $1.005

Important information: 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. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Also in the Switzer Super Report

• Paul Rickard: Should you buy Origin Energy’s hybrid notes?
• JP Goldman: Which high-income ETF is best for your SMSF?
• Tony Negline: Should I buy property or contribute to super?
• Peter Switzer: Warren Buffett and 18 high yielding stocks to buy
• Andrew Bloore: Your responsibilities as an SMSF trustee