The US-China trade deal/no trade deal seesaw continues to drive the markets' daily ups and downs.
But behind these day-to-day swings is the rise and rise on Wall Street - to new record highs.
To be sure, the third quarter reporting season was nothing to write home to mother about. According to Factset's 'Earnings Insight' Report, dated November 15: "For Q3 2019 (with 92% of the companies in the S&P 500 reporting actual results), 75% of S&P 500 companies have reported a positive EPS surprise and 60% of S&P 500 companies have reported a positive revenue surprise."
A good result but ... a result of managed expectations?
Factset notes that: "For Q3 2019, the blended earnings decline for the S&P 500 is -2.3%. If -2.3% is the actual decline for the quarter, it will mark the first time the index has reported three straight quarters of year-over-year earnings declines since Q4 2015 through Q2 2016."
Bad news is good news? Unlikely at this point in time for the Fed's on pause. I scrolled through the CME Group's FedWatch Tool and found that the probabilities of the US central bank maintaining the fed funds rate at the 1.50%-1.75% are all higher than a rate cut starting from its December 2019 FOMC meeting right through its next six meetings in 2020 (September 2020).
The likelihood of a rate cut then surpasses the "on hold" probability, but only just - 38.5% versus 34.8% -- and even then, these rate cut odds have come down from 38.8% a week earlier. The same goes for its December 2020 meeting: no change at 31.5%; cut at 38.1% but lower than the 39.2% a week before.
The answer could be in the US consumer. They are optimistic.
The University of Michigan's consumer sentiment index rose to 96.8 in November - its highest reading in four months - from 95.5 in the previous month.
The report noted stated: "In 30 of the past 35 months the Sentiment Index was 95.0 or higher, a level of optimism second only to when the Index was above 100.0 for 34 out of 36 months from January 1998 to December 2000, averaging 106.0."
"Personal spending will be energized by record favorable evaluations by consumers of their personal financial situation, with gains expected across the entire income distribution, net increases in household wealth, the renewed appeal of price discounting, and reduced mortgage rates."
While the annual growth in US personal spending from around 6% in mid-2018, at 4%, it remains above its long-term average of 3.7%.
US personal consumption expenditure accounts for around 70% of the US economy. They have jobs, they feel richer - the S&P 500 index has risen by 24.1% this year to date; the S&P/Case-Shiller US National Home Price Index has increased by 9% over the past 12 months - they will spend, lifting business revenues and income.
Then again, as the University of Michigan warns: "There is little point in dismissing the significant risks from potential negative shocks, associated with tariffs, impeachment, the presidential election, global growth, and geopolitical events."