With modest GDP growth and a 1.4 trillion deficit downside to equities can only come from an external shock.
High unemployment keeps the Fed on hold and the 0 rate policy keeps costs of production down and keeps personal income gains modest.
At least for now, the combo of 0 rates and an 8%+ budget deficit continues to be supportive of only modest aggregate demand growth and only very modest employment growth.
Again, good for stocks, where a bit of top line growth and productivity gains keep earnings growth positive.
- Strong service sector report with particular strength in key components (orders and employment)
- Employment index crosses 50 and at highest since 2008
- Service sector picking up growth mantle from manufacturing
- ADP gain plus upward revision to prior month suggest about 125-150k in private sector job growth