I am a true believer in the economic re-acceleration thesis now. Here’s why

Real quick here today, since I’m supposed to be on Holiday. The data out this morning in the US were extremely bullish in my view. And, as I’ve been saying April data would make or break the economic re-acceleration thesis, I am finally going to tip my hand and go all in on the bull side.

Here are the datasets from today:

• Initial jobless claims: 192k vs 205k expected and 197k prior
• Continuing jobless claims: 1653k vs 1720k expected and 1716k prior
• Core retail sales (y-o-y): 6.2% vs 4.0% expected and 3.8% prior
• Core retail sales (m-o-m): 1.2% vs -0.3% expected and 0.4% prior
• Retail sales (y-o-y): 6.7% vs 4.6 expected and 4.0% prior
• Retail sales (m-o-): 1.1% vs -0.3% expected and 0.4% prior

Solid beats all around on the consumer side – both income (i.e. jobs) and consumer spending (i.e. retail sales)

In true form, though, the manufacturing data out today showed weakness. The Philly Fed manufacturing index came in light at 8.5 vs 10.5 expected and 13.7 prior, with business confidence down. So, manufacturing is lagging here. But, the forward looking numbers were good: Capex index, Employment and New Orders.

My take: As I  hinted yesterday, the US economy is re-accelerating off of a shutdown- and seasonality-laden winter low. And that’s bullish for risk assets. What’s more, the Fed has backed down completely, with Powell now explicitly taking on a ‘whites of the eyes’ inflation stance. This is something that even Yellen didn’t do. And so, it suggests the Fed might be on hold for the entire year, despite signaling at least one 2019 rate hike in their latest forward guidance.

Expect a flood of corporate debt issuance, combined with stock buybacks. I would also expect a lot of high yield issuance at relatively low spreads and all of the likely IPO candidates – like Slack, Pinterest, and Uber – to get off the ground. This is an environment ripe for animal spirits. 2019 will be better than expected.