Everyone is starting to like stocks, and that’s not good

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Everyone is starting to like stocks, and that's not good


The recent data have surpassed expectations, particularly in the U.S. The ADP jobs report was way above expectations, but that has happened a lot recently.

Just look at these recent headlines: “Strongest month of job gains since March 2017,” “Job-cut announcements in 2017 see lowest level since 1990, Challenger report says,” “Commodity prices hit highest point since 2014.”

See what I mean? Citigroup’s Economic Surprise Index, a measure of how much recent economic stats have been above or below expectations, is now at the third-highest level since the financial recovery.

Economic growth well above expectations could be an issue for stocks. Pretty soon, we will be back to debating when “good” economic news is “bad” for the markets because it increases the chances the Fed will suddenly get more aggressive on rate hikes.

You will know we have reached that point when the market suddenly droops on economic data that comes in above expectations. That’s why a lot of traders will be watching the market reaction if we get a blowout number on the jobs report Friday morning.



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