What happened last week.
What we're watching for
next week.
Things are about to get real
We're getting close to finding some answers to the important questions that investors have been struggling with for more than a year.
Will the economy tip over into a recession?
Will the stock market tip over into full bear mode before the recession?
Will China eventually cave to President Trump's demands?
Will the Russians mess with the 2020 elections, as they did in 2016?
Will the promise of massive spending on infrastructure ever materialize?
These are big questions that can't be answered in the present. But discerning investors will be thinking about them.
Chart 1. S&P periodic returns.
A flat week. Nothing to see here, people. Move along. But wait a second... is there something going on under the surface that we should be paying attention to?
Chart 2. Distance from Key Markers
The next chart reinforces what we saw previously - a market that is rallying on a short-term basis but is still under water.
Chart 3 - chart of the week
This chart comes from Jill Mislinski and Doug Short from AdvisorPerspectives. I chose this chart because it's a reminder that inflation is not dead. We've enjoyed many years of low inflation recently, but we shouldn't become complacent about it. The Fed is tasked with the responsibility to manage inflation, and when (not if) inflation comes back with a vengeance the Fed will have no choice but to jack up short-term rates to combat it.
That day may be years away, but it will get here eventually. Inflation is like Communism. Everybody feels just a little uncomfortable about it, but as long as it doesn't affect them today they don't spend much time worrying about it.
Final Thoughts
We've had a nice rally in the market. But I'm not yet convinced that we will make a new high before we finally succumb to the next bear market.
I could be wrong, of course, but I follow my models and they are showing increasing risk and diminishing prospects for a new high.
For a full analysis of the probability of a bear market or a new recession, see my Monthly Intelligence Report.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org