As we head into earnings season, the cloud will be thick with "how is it possibles," as in, "how it is possible with President Trump so stymied, how is it possible with so little growth, and how is it possible with the Fed letting the air out of the balloon" for us to rally?
There are never clear answers. For example, so much of what we hear is filled by ideologues masking as truth brokers. Does anyone really still think that a Fed that is raising rates is still causing stocks to rally? You have to anticipate that the day isn't far away where the Fed will be perceived to be the enemy of stocks. Does anyone who has studied the matter at hand believe that the earnings are chimerical or that stocks are incredibly expensive if, indeed, the estimates for individual stocks are met or beaten?
What I think is crucial though, what isn't getting enough attention is how we are seeing such strong turns in so many countries and continents. We can see it in Europe with the solving of one banking crisis after another that keeps driving the euro, one of my favorite currencies, higher. It is why I think the iShares MSCI Eurozone ETF (EZU) makes so much sense.
We can see it in Russia where, already, from Pepsico (PEP) , we know things have stabilized. We know that India has emerged as a capitalist hotbed of late -- and I think it's just beginning. China's numbers seem strong, last night's 6.9% GDP certainly verifies that. Oh, and can we stipulate that just two short years ago we were concerned about a Chinese implosion and, instead, we should have just been kicking ourselves that we didn't buy that market?
But what I find most heartening is the action in the commodities and commodity-related stocks. For example, have you been watching BHP (BHP) and Vale, the two stocks most closely related to commodity strength? BHP is up 10% for the year, yields 4% and has Elliott Management in there pushing for you, with a revamped website designed to entice retail investors to their side. Vale, that catch-all Brazilian company with dominant share in iron ore, copper and alumina, has finally started to roll back up after years of a downturn. Its shares have gained 21%. Rio Tinto, one of the major producers of lead, iron ore and zinc, has a stock that's moved up 17% and yet still yields 5.56%.
These are some important moves. Plus the iPath Bloomberg Copper SubTR ETN (JJC) , is finally at $30 and looking like it can break out.
Also, note the action in the stocks of Caterpillar (CAT) , Cummins (CMI) , Honeywell (HON) , Boeing (BA) and 3M (MMM) . They have been on a steady path higher and they all have in common a greater than 50% book of business from overseas.
I can't stress how important this development is. I have heard forever now that housing's not budging, that healthcare costs are rising and that autos have peaked -- although be careful there betting against those stocks. They have some pretty strong action to them of late.
But we do not need those stocks, which are not heavily represented in the Dow or the Nasdaq, if we are going to plow forward.
It's the international that can drive us here, and not just because the dollar's comparisons are now easier. I look for it to do just that as we dive headlong into earnings season.