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What will be the Trigger for Higher Equity Prices?

David Becker
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May has come around and investors are leery of stock as many conform to the old adage, sell in May and go away. Traders are waiting for a catalyst to drive stock prices higher, but there are many economic numbers that should give investors’ confidence.

On Wednesday of last week, the Fed laughed in the face of the +0.1% GDP reading for last quarter. They knew the weakness was temporary in nature and that Q2 economic data was already showing a healthy rebound.

Thursday brought ample proof of this in the form of improving manufacturing data and healthy gains in both personal income and spending. With that stocks are now within striking distance of new highs at 1900 on the S&P 500 index, but already notch up a new all-time high on the Dow.

The 288K job gains reading from Friday’s Government Employment Situation report could have been the catalyst to make higher price on stock a reality. Unfortunately the wall of worry of geopolitical events took center stage instead and investors will now have to wait as there are then sometime soon we fewer and fewer reasons to be bearish.

Earnings will continue to stream out this week, but there is little new economic data that will drive stocks this week. Earnings have been relatively impressive with approximately 70% of the company in the S&P 500 index reporting and 69% beating expectations. Look for small cap stocks to drive market going forward, as despite the climb in the large cap indices, small caps have tumbled giving up market leadership.

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