The latest GDP reading of 3 percent was surprisingly strong after the multiple hurricanes that hit the United States, while consumer confidence has hit a 17-year high, according to the Conference Board.
A baseline bullishness has been in place throughout 2017. And the latest GDP number was released after the survey of million-dollar self-directed brokerage investors, conducted by E-Trade and provided exclusively to CNBC. But Loewengart said it is confirmation of the trend line with broader economic statistics and “the slow burn” of the U.S. economy. Corporate earnings have been solid at the same time, he said. Exchange-traded fund flows to equity portfolios were more than $43 billion in October, the highest level since the post-election euphoria of November 2016. In October, the top two stock ETFs for new flows from investors were S&P 500 funds, which is a change from recent months during which overseas stock ETFs had led over US stock portfolios in flows.
Mitch Goldberg, president of investment advisory firm ClientFirst Strategy, said the level of confidence could make some in the market reflexively become contrarian, but this bullishness doesn’t have to mean it’s time for stocks to have a sudden, spontaneous meltdown.
He said years of “breathtakingly massive” corporate stock buybacks since the end of the Great Recession are giving way to the high-end retail investor taking the reins. “And why wouldn’t they? When you see synchronized global growth combined with big earnings upside surprises from cyclical type companies, you’re in the sweet spot of corporate growth. Plus, we had to get through an earnings recession last year to get to this point.”
The percentage of investors with million-dollar brokerage accounts who expect the market to end the fourth quarter rising was in the 50s through the first three quarters of the year, before jumping to 71 percent in the fourth quarter. Those who think the market will rise by 10 percent hit double-digits for the first time this year (17 percent of million-dollar account holders). The percentage of these investors who expect the market to end the quarter down has declined steadily, from 22 percent in Q1 to 9 percent in the latest survey.