Maybe we don't know what good looks like. Maybe we are so cynical, so beaten-up, so conditioned to things going wrong, or that you can only have one group go up all at once, that we can't imagine what we are seeing on our screens.
Perhaps that's what's happening today, after another good month when we just steadily powered higher in a way that we just haven't seen in ages or that many younger portfolio managers haven't seen at all.
Let's start with the presumption that the world's been starved for growth for ages. We simply haven't seen anything like it in so long that we have a hard time grasping it. The move therefore seems phony.
But go back in time to a few years ago. Think about what happened. The sequence. We had the Great Recession here and a huge slowdown worldwide. It seared our consciences and made it clear that things would never be the same again. Growth would always be low and hard to come by. The economy here and the economies abroad were going to be muted because of a mindset that there could be little capital spending or business formation.
What defined a winning stock? A company that bought back stock, fired people and made a little bit of sales growth translates into a decent bottom line. Or a company that shrank to grow. Or a company that acquired another company in order to fire a lot of people and increase the profit margins. Split-offs, spinoffs, divisions dumped, it all worked.
If you got any acceleration in earnings, it was clustered around a few companies we called FANG: Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) and Google, now Alphabet (GOOGL) . We came up with the acronym to shine a light on pretty much the only companies that had actual organic growth regardless of how the economies around the world were doing. Facebook went from being something you got at Harvard before you arrived freshman year to something that 2 billion people provide the content for to the delight of willing advertisers. Amazon became the world's greatest retailer by offering Prime. The much-scoffed-at Netflix became the first worldwide television network. Alphabet used computer power to create search, which allowed advertisers to place their wares right where it made the most sense to put them -- the point of sale.
Over time, though, the narrative began to change. The central banks lowered rates and kept them low. Seemingly every country on Earth made cheaper money available. Inexpensive money plus pure demographics -- in our case, how long could you really stay with your folks under the same roof as your family grew -- and a healthy loss of memory of the bad old days combined to start a new business cycle here. China grew more consistent. Japan ignited. Europe, after initially going worse than us because of two ill-advised rate hikes by a central banker who really didn't understand the depths of how bad things were, really caught fire. India turned. Latin America, ex Venezuela and Brazil, prospered.
Next thing you know, the companies that had gotten leaner and more technological saw their order books grow and were ready to meet the demand with far fewer people. Any pickup in sales led to much larger profits than any of the analysts seemed to think would happen.
At the same time, the Street became infested with negativity. Stocks that moved up in anticipation of earnings were castigated. FANG was considered heresy. Any upward movement in cyclical stocks was derided. Plus, the market seemed fragile and memories die hard. It was so much easier to be a bear than a bull.
Now the political people among us would like to regard the election of Donald Trump as a watershed moment that infused our business people with confidence. I look at it more holistically. Europe, which had been a constant worry, flipped and became a source of growth as low rates kicked in and an immigrant population demanded spending. China stayed steady. The turn continued in all the other countries and even accelerated, and now you have worldwide synchronized growth. This occurred at the same time that our energy costs plummeted and inflation simply failed to ignite as would have been expected. Those shortselling hedge fund managers who demanded higher rates quickly were not heeded and, instead, intelligent and measured rate hikes are occurring.
At this point, we are in the midst of a quarter where everything seems to have come together. The industrials are crushing the numbers. The techs are steaming higher because of the Internet of Things and the data center, the move to the cloud, artificial intelligence and machine learning. The Internet of Things extends to the home, the car, the plane, travel, leisure, you name it, and we can't get enough semiconductors to make it all work. You get a quarter like we did last night from Samsung, the huge Korean semiconductor company, and you marvel that there simply aren't enough DRAMs or flash memory chips to meet demand, hence why a Micron (MU) or a Western Digital (WDC) can fly, taking Lam (LRCX) and Applied Materials (AMAT) with them. You have early reviews of the new Apple AAPL phones, so Apple's stock and the stocks of everything in those phones gets rewarded.
Industrials can't keep up with demand in aerospace, in defense, in construction and layer on top the rebuild from the storms in Florida and Texas and you get a recovery in so many of the housing-related stocks.
How far does the strength extend? Personal computers have recovered, powering Intel (INTC) , which might sub for Qualcomm (QCOM) in the new iPhones next year because of a nasty dispute. Microsoft's (MSFT) cloud and PC businesses are accelerating.
Tech's a big sector and all of it is being lifted by phones, data centers and smart machines of all kinds.
Aerospace and defense soar, the former because of a return to worldwide travel and flush airlines and the latter because of a new president. Transports rally because there's more commerce, more imports, more exports.
At the same time, the banks are benefiting not just from net interest margin (what they make from your deposits), but from actual loan growth, which will then cause rates to go higher, padding their bottom lines.
Utilities and housing are growing because of the demographical changes and because there's enough money to buy new homes, and yet they are scarce. Every company that sells into housing's doing incredibly well, even the ones against Amazon like Best Buy (BBY) and Home Depot (HD) and Lowe's (LOW) and everything that get sold in their aisles like Stanley Black & Decker (SWK) and Sherwin Williams (SHW) and Fortune Brands Home & Security (FBHS) . The stay-at-home economy has taken off with video games powered by Nvidia (NVDA) , and Netflix and big-screen televisions and home theaters while delivery thrives. (Facebook, Alphabet, Apple and Nvidia are part of TheStreet's Action Alerts PLUS portfolio.)
Today, whole new groups are joining the party. The foods are recovering, in part because it looks like things have stopped their freefall. That's how I look at the strength in the group led by Kellogg's (K) and giant snacking company Mondelez (MDLZ) . Consumer packaged-goods companies trade with them and those rally, too. I have no idea how long that will last, but it's moving the stocks of a ton of companies.
It's easy, of course, to throw cold water on the rally. Under Armour's (UAA) performance today was terrible. There's way too much inventory in keeping with a general retail malaise that has crushed the stocks of Macy's (M) and Kohl's (KSS) . That's the anti-inflationary Amazon at work. The steady nature of the drug companies isn't enough to attract new money and their stocks are obliterated on any loss of patent, any challenge to a new drug.
I would contend, though, that those are now outliers. This quarter's proven to be one of tremendous bounty, so tremendous that people can't recognize it. Hence healthy skepticism has been dwarfed by unhealthy, corroded, jaded thinking.
I am not telling people to lighten up either in stocks or in mindset. I am urging them to forget about tax reform or who runs the Fed or where rates are going in 2018 and accept the fact that we have a genuine non-inflationary boom going on both here and worldwide and the stock market accurately reflects that joyous situation.