Weighing the Week Ahead: Where is the Fear?

With a light economic calendar, there is plenty of air time for pundit pontification. The record-setting market still has many shaking their heads. Many, after noting the many world problems, are asking:

Where is the fear?

Last Week Recap

My last edition of WTWA (two weeks ago) asked whether earnings season could spark a big rally. That was a pretty good topic to consider over the last two weeks. (And it is still quite relevant).

The Story in One Chart

I always start my personal review of the week by looking at this great chart from Doug Short via Jill Mislinski. She notes the gain of 0.86% on the week, as well as other key comparisons. Once again, it was a week of very low volatility.

Doug has a special knack for pulling together all the relevant information. His charts save more than a thousand words! Read the entire post for several more charts providing long-term perspective, including the size and frequency of drawdowns.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

The economic news has been mostly positive.

The Good

  • Industrial production rebounded from last month’s decline to a gain of 0.3%, beating expectations.
  • Corporate earnings have been solid, with 76% of S&P 500 companies beating expectations. (Factset).
  • Conference calls have been positive. Avondale has detailed notes. Corbin Perception also notes strength in industrial sentiment. More than half regard industrial equities as fairly valued, with “overvalued” declining. Tax reform or infrastructure spending are not priced into the market.

  • Philly Fed
    index of 27.9 rose significantly from last month’s 23.8
  • Existing home sales registered a slight beat of expectations with an annual rate of 5.39 million. Calculated Risk treats anything over 5 million as “solid.”
  • Jobless claims declined to 222K. (Bespoke) New Deal Democrat’s hurricane adjustments for this series have proved accurate.