What if business is getting better? What if there's actual movement in the economy that can help stocks? What if something like a small-business survey shows a remarkable return to optimism, something that is helping ignite stocks today?
Every Friday when I do my game plan, I try to find what can influence stocks and highlight it. One of the things that hit my radar screen was something called the National Federation of Independent Business survey of small-business optimism.
I figured what happens if there is a real big jump in this survey, if there is a gigantic boost in small-business confidence given that small business does most of the hiring in this country.
But then I dismissed it. What chance would there be that this survey could move the needle? It's something I have never reported on before, why do it now?
I was wrong. This morning this survey showed the greatest surge of optimism since 1980, when Ronald Reagan was elected and ushered in a tremendous change in thinking about the prospects of business. The index, which polls 619 businesses -- enough to be representative -- shows a jump of 7.4 to 105.8, the highest since 2004, another time that business regarded as a positive moment.
The survey is heavily skewed toward the notion of expansion, meaning that the more optimism, the more hiring and job creation, and the more of those, the more improvement in the national economic picture.
I can't emphasize how important this all is because right now there is a perception in the mainstream media that there's nothing but trouble ahead with President-elect Trump's nominations, with his plans, with his style.
That may be so. But the survey I care about says Main Street likes what is happening. I know this is a bit ethereal, nevertheless you can extend this survey to mean more lending, more building and more buying of plant and equipment. Maybe you need to buy a new Ford (F) F-150 to move product. Maybe you are willing to take a loan and get a lease to do something that you wouldn't have before the election because of some sort of funk, some sort of malaise that started in Washington.
For ages, we heard that "the market" liked gridlock. Now that whole mindset is being called into question. Sure, it's great that gridlock doesn't promote growth because that can keep rates low, and keep the Federal Reserve on hold. That makes you want to own Procter & Gamble (PG) and Clorox (CLX) , or the real estate investment trusts or the utilities or the drug stocks.
However, it doesn't make you want to own the banks because they need rates higher. It doesn't make you want to buy the metals because they need more economic activity. You don't want to own an airline or railroad or an industrial. They underperform in a static economic environment. Oh, and more business means more technology sales.
Or, to put it another way, if the economy builds a head of steam, there are a whole different group of stocks to buy than with a stagnant economy, and the rally in those exact stocks is what's happening.
Now, that's an awful lot to put on a survey. What happens, though, if there are other signs of strength? Last night we saw a producer price index in China that was much stronger than we thought, which is a sign of more economic activity in a country that's key for business growth. Maybe Trump doesn't get his way instantly on $500 billion in infrastructure. It's a real boost to see that China might be stronger, hence why stocks like Caterpillar (CAT) , Cummins (CMI) , Freeport McMoRan (FCX) , BHP (BHP) , Vale (VALE) and Rio Tinto (RIO) are roaring. We need those to rally because they are part and parcel of the new bull market, the one that started after the election, as opposed to whatever we had before, which was limited to the household-products companies and FANG -- my acronym for Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) and Google (GOOGL) , now Alphabet. (Amazon is part of TheStreet's Growth Seeker portfolio.)
It's not just the producer prices. China posted a 17% gain in December car sales. No wonder General Motors GM put out such strong guidance today, which caused its stock to roar. And Bernstein put out a note today saying Macau gambling's started the year off strong, igniting Wynn (WYNN) and Las Vegas Sands (LVS) .
We know retail's been a drag. I see no change in that. But you know what took the market by surprise? The first good number out of Chipotle Mexican Grill (CMG) in ages, a number that showed a decline in same-store sales of only 4.8%. That's remarkable given how negative these numbers had been, with double-digit declines becoming a staple. Sure, earnings projections were below expectations, but that's not what you key on. You key on the prospect that Americans are beginning to put the illnesses associated with the stores behind them.
If you recall, we have studied the restaurant chains that have been afflicted by health care concerns and the stocks don't regain their luster until 18 months after the last incident. The last incident of airborne illness caught at a Chipotle was 13 months ago. The numbers aren't positive yet, but the fact is Chipotle's right on schedule for a turnaround.
It's amazing to me how negative people still are. When the news broke, Chipotle's stock plunged 16 points. I found myself shouting at my team that's the most stupid reaction imaginable. Same-store sales have disappointed for ages. The actual earnings could be impacted by everything from increased labor costs to something that has struck my own Bar San Miguel in Brooklyn -- out-of-control avocado costs.
The positive reaction to Chipotle's numbers trickled down to a host of restaurant chains including Popeyes Louisiana Kitchen (PLKI) , which pre-announced a number that many on Twitter thought was negative but didn't understand the zeitgeist. It wasn't an earnings forecast slash. That's what matters. Panera Bread (PNRA) , considered a close analog to Chipotle when it comes to natural and organic, rallied, too. (Facebook, Google and Panera Bread are part of TheStreet's Action Alerts PLUS portfolio.)
One other better-than-expected report that I can't pass up on: the sale of a couple of unimportant divisions of the debt-challenged Valeant (VRX) , the former darling of pharmaceutical companies. With $30 billion in debt, Valeant is regarded as a ticking time bomb, something that could end up becoming a real issue for consumer-product investors. I know the $2 billion it got doesn't do all that much to slim the debt down. But it's a start. Anything that helps take a huge negative like that off the table makes you feel better about committing any capital. Don't dismiss this. Valeant's been hanging over this entire market like a piano just waiting to fall because it's long history of raising prices -- not a Trump stock -- and its humongous debt that's so big it can cause havoc with the entire corporate bond market.
Now we can take all of these tidbits and make a positive mosaic of them, one that says you don't need to worry every minute about what will happen with all of these upcoming hearings and the Trump agenda of lower corporate taxes, repatriation and deregulation. A better business environment can support higher earnings, as GM showed today with its guidance.
Suffice it to say that not everything has to be viewed through the filter of wars over appointments and jabs in the media about the failed upcoming presidency of Donald J. Trump. Today's a day where we said, hmm, maybe business is better. In the end, that's what has to happen to sustain the rally, and maybe it's already started to play a role.