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Jed Graham

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The IBD/TIPP Economic Optimism Index hit a 10-month high in January, as low interest rates and a China trade deal lifted the Dow Jones and broader stock market to new record highs. All the good news for the Trump economy boosted support for federal economic policies to a 16-year high.

The Economic Optimism Index rose for the fourth straight month, gaining four-tenths of a point to 57.4. That’s not far off the 15-year high of 58.0 touched in May, just before President Trump blew up the first China trade war cease-fire. Readings above the neutral 50 level reflect optimism.

There was one dissonant note in the cheerful outlook. The gauge of the six-month economic outlook dipped 1.9 points to a slightly optimistic 51.1.

Economic Optimism Index Components

The IBD/TIPP Economic Optimism Index is a composite of three major subindexes. They track views of near-term economic prospects, the outlook for personal finances, and views of how well government economic policies are working.

The six-month outlook gauge for the economy is up 8.1 points since September, but remains 6.4 points below the 13-year high of 57.5 in February 2018 that came on the heels of tax cuts. The index registered a low of 32.1 in December 2007 as the economy entered recession.

The personal finances subindex rose 1.5 points to 64.6, which is strongly optimistic. The index launched in 2001 and hit a record 66.7 in October 2018 before financial markets hit turbulence late last year.

The federal policies subindex rose 1.4 points to 56.4. That’s the highest since April 2003.

Fed-Fueled Trump Economy?

How is it that optimism about the near-term outlook is minimal, while views of personal finances have reached a cruising altitude? The Fed’s dovish fingerprints are all over the latest IBD/TIPP Poll results.

Last year’s big gains for the Dow Jones and broader stock market came as earnings flatlined but valuations rose on the lower interest-rate outlook. While low interest rates also are helping consumer balance sheets, there’s a clear split in how investors and noninvestors feel about the Trump economy.

Among investors, overall Economic Optimism rose to 60.0 in January vs. 53.2 for noninvestors. Likewise, support for federal economic policies is much higher among investors (60.8) than noninvestors (49.4).

Author: Jed Graham

Source: Investors: Economic Optimism Rises As Trump Policies Get Thumbs Up: IBD/TIPP

President Donald Trump’s latest plan to combat high medical prices is being greeted by Wall Street as a reason to buy health care stocks. Hospital stocks and managed care stocks surged Friday. HCA Healthcare (HCA) and Dow Jones component UnitedHealth (UNH) broke out of consolidations, with several others nearing buy points.

Hospital Stocks, Health Insurers Gain

HCA stock spiked to 140.04, closing up 2.65% at 138.05. That stock just cleared a buy point at 138.04, according to a MarketSmith analysis. Tenet Healthcare (THC) gained 3.7% to 30.56, pennies below a 30.63 buy point.

UnitedHealth Group (UNH), the No. 1 insurer with its own health services empire, shot up 5.3% to 269.40. UnitedHealth stock, a Dow Jones component, cleared a 268.79 buy point from a cup base going back to July 17. Intraday, UnitedHealth stock rallied to 275.57, an 11-month high and briefly clearing a 272.59 entry.

Centene (CNC), Anthem (ANTM) and Humana (HUM) all rose more than 5%. Cigna (CI) gained 3.3%. CVS Health (CVS) climbed 1.85% to an 11-month high.

Investors may see the Trump administration rules as a positive for managed care companies, especially if they can steer members to their own low-cost networks.

Trump Takes Another Stab At Health Care Costs

“We’re requiring price transparency in health care, forcing companies to compete for your business,” Trump said Friday in announcing two proposed rules.

One rule would require hospitals, starting 2021, to reveal the negotiated rates they charge insurers for medical services and prescription drugs. The other rule would require insurers to make public their negotiated rates with in-network providers and expected payments to out-of-network providers. One goal is to keep people from being blindsided by high costs, especially from out-of-network providers. The Trump administration also thinks it will spur people to shop for lower prices.

Health Care Sector Avoids Tough Medicine

So why were investors so upbeat about the proposals? One reason may be that they feared tougher rules. Hospitals, for example, would only face a maximum $300 fine per day for failing to provide adequate transparency, noted Larry Levitt, Kaiser Family Foundation executive vice president.

“I wonder how many hospitals will just pay the fine,” Levitt tweeted.

The second rule to encourage shopping for low prices has a potential upside for insurers. Savings from encouraging use of lower-cost providers could translate to higher profitability with a tweak to government rules requiring that a minimum share of premiums be spent on benefits.

Because Trump is at odds with House Speaker Nancy Pelosi’s push to let Medicare negotiate drug prices, investors may be breathing easier about health care regulation between now and the 2020 election. In July, the White House dropped a rule to sharply limit rebates from drugmakers to prescription benefit managers, such as UnitedHealth’s OptumRx and CVS Caremark.

Author: Jed Graham

Source: Investors: UnitedHealth, HCA Break Out As Health Care Stocks Jump For Trump Medical Price Transparency

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