Happy Fourth of July! Markets are closed for the holiday. Friday will bring a critical jobs report.

Today, we have a special edition of the newsletter that includes two interviews covering reasons to be optimistic about the American economy and stock market.

Reasons to cheer in the US

In today’s America, inflation still bites, the political scene is rife with turmoil, housing is unaffordable, and there are whispers of a bubble in the stock market. 

Headlines alone could leave anyone feeling bearish and bracing for economic Armageddon.

But Lauren Sanfilippo, a senior investment strategist for Merrill and Bank of America Private Bank, isn’t buying it.

She co-authored a report that she shared with me breaking down the case for optimism in the US.

Among the reasons:

The easiest metric to point to this year has been the banner first-half performance for the stock market. 

The S&P 500 climbed more than 15% in the first six months of 2024, and history says the second half of an election year is even better for equities.  

When asked about the exuberance among equity investors — particularly for AI names — she told me it’s possible that valuations have ballooned a bit too much, yet it’s also true that the technology could have a real impact on economic productivity. 

Remember, pessimism across Wall Street has dwindled every month of the year.

On Wednesday, Bloomberg reported that JPMorgan’s chief global market strategist Marko Kolanovic — one of the most bearish strategists of the year — would be leaving the bank after 19 years.

His team maintains a Street-low S&P 500 forecast for this year of 4,200. 

Meanwhile, from a macro perspective, optimists have plenty to celebrate.

“For one, growth should moderate towards 2.0% while still on solid footing,” Sanfilippo said.

“Consumers, 70% of the economy, have effectively termed out their debt and have healthy balance sheets. The most insulating factor is that consumers have jobs, as unemployment has run at 4% or under for 2.5 years.”

And while political uncertainty seems high, Sanfilippo added that she anticipates foreign investors to continue deploying capital into the US as the rest of the world deals with dysfunction of its own.

Even the growing mountain of debt, in her view, doesn’t warrant pessimism given that such an overhang is not unique to the US.

Nothing there is likely to change soon, and the deficit at least presents a “known unknown” for investors. 

“Money goes where it’s treated best,” she said.

“The U.S. still exhibits some of the best growth dynamics both on the macro front and in the corporate sector regardless of the political hazard that the election introduces.”

Comments or feedback? Hit reply to this email or let me know on X @philrosenn.

Podcast:

I sat down with investor Anthony Pompliano to discuss the roaring stock market, US housing crisis, and the economic outlook for the rest of this election year:

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