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The upside surprise and upward revision to the September Retail Sales data reinforce our view the economy was ramping ahead of the election.  We would make the following brief observations:

• The “core” Retail Sales data that excludes volatility in Auto Sales and Gas Station sales doubled expectations by rising 0.6% vs. expectations of 0.3%.  In addition, September “core” sales were revised up from 0.3% to 0.5%.
• The prospect of lower taxes and increased fiscal stimulus following the election should only serve to cause an increase in economic and EPS assumptions as we move into 2017
• Atlanta Fed GDP Now forecast points to over 3% annualized GDP in Q4/16.
• Expect Fed to raise rates at December FOMC meeting regardless of post-election speculation.  The data has just been trending too well, and inflation expectations have been rising steadily since September as measured by the 5-year U.S. Treasury Inflation Breakeven (Chart below).

5-Yr Inflation Breakeven expectations continues to move higher

Summary. Despite the likelihood of temporary pause in the upside given recent ramp, we remain buyers because; (1) our positive fundamental core thesis remains in place, (2) economic data and EPS continues to improve, and (3) our key tactical indicators suggest a favorable risk/reward environment. We want to be positioned for the next leg higher toward our SPX 2017 target of 2,340 led by the more offensive sectors such as Financials, Info Tech, Industrials and Healthcare.

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