as part of our
, I encouraged you to embrace the possibility that the U.S. economy
might actually be gaining momentum.
I know. It's not exactly a popular stance.
But lo and behold, in the short time that's passed since then,
even more evidence emerged in support of such a contrarian
Let me share it with you - and explain why it matters.
Then, I'm singling out the two earnings reports to focus on this
week. Each promises to provide critical intelligence regarding how
much of a positive surprise we can expect for U.S. GDP growth in
Without further ado…
Out With the Old
I previously predicted that the economy is overdue for a boost,
as consumers and businesses begin replacing old "stuff" like cars,
appliances, heavy equipment and furniture.
Guess what? The latest data suggests that the replacement cycle
is upon us!
On Monday, the Commerce Department reported that durable goods
orders increased 4.6%. Once again, economists' forecasts look
sillier than weathermen's. (The median forecast of 76 economists
called for a mere 2% increase.)
Lest you think the monthly uptick is an anomaly, the increase
capped the first four-month gain in durable goods since 1992. So
) economist, Peter Newland, told
, demand is "back on track." I'd say so.
And the more it picks up, the more likely that U.S. GDP is going
to come in higher than expected. (Remember, economists only expect
2% growth this year.)
No Lack of Earnings Surprises, Either
As you know, the earnings reporting season is in full swing. And
the latest stats confirm that an uptick in demand is materializing
across multiple sectors, not just durable goods.
Case in point: The earnings "beat rate" (the percentage of
companies topping analysts' earnings estimates) increased from 59%
to 63.9% in the last week.
Even better, the revenue "beat rate" (the percentage of
companies topping analysts' sales estimates) now rests at
That's a country mile higher than last quarter's revenue beat
rate of 48.2%, and the surest sign that demand is picking up across
Keep An Eye on Pickups and Tablets
If the trend of better-than-expected reports continues, I bet
you dollars to donuts that economists will be revising their GDP
growth forecasts to the upside.
The two companies I'll be watching closely this week are
), which reports before the opening bell today, and
), which reports after the bell today.
As I told you last week, small business owners account for the
majority of pickup truck purchases. And small businesses are an
undeniable driver of U.S. economic growth. So any further signs of
strength from Ford bode well for the economy.
Meanwhile, Amazon's status as the King of Online Retail makes
its results a strong proxy for consumer spending habits, which is
another key driver of economic growth.
Bottom line: Analysts and economists remain too downbeat on the
economy. That's no longer just a contrarian hunch. The latest data
proves it, as more and more reports keep coming in well ahead of
I recommend tracking the situation in the coming weeks. Why?
Because stronger GDP growth only increases the prospects for stock