Consumers back in the driver's seat

Car sales have been strong. So both Ford and GM are doing well. GM just had a big and successful IPO. What a change.

Holidays sales are going up strong for this season. Expect to see increased traffic in malls.

The big surprise today is the pending sales of existing homes. They rose a record 10% in October, aided by low mortgage rates and improving consumer confidence. That should help clear out more of the bloaded inventories. Home builder stocks are gaining grounds.

After two years of belt-tightening, are American consumers ready to take charge?

The graph below shows that the Personal Consumption Expenditures (PCE, the largest component of GDP) are on track to grow back to its trend line.

Much of this improved picture will continue to depend on job creations. Governments can help. Central banks can help. But it looks like the private sectors are slowly moving ahead to expand. 2011 will probably be slow going, interrupted by lingering credit flare ups (Euro zone especially). But if consumers start to take charge, we expect to see some acceleration of growth in the 2nd half of 2011.

It was a good day for the market today. Tomorrow's good news in employment number may have already been baked in. As Dow is closing in onto the height of the year, it would be wise to raise cash.