Summertime

I think the best way to describe the markets over the past several weeks is to say that we've been consolidating at higher prices with a more positive bias.  The S&P 500 is up roughly 8% since the "Brexit" scare back at the end of June.  The market has so far been lodged in a narrow trading pattern since the middle of July.  Most of the time we've barely traded beyond a 1% range.  Depending on your perspective, we're either consolidating those gains in preparation for the next move higher or topping out before we begin some sort of decline.  

Most of Wall Street  seems to be in the decline camp.  Professionals just hate this market.  Really most of them have hated it since 2008, but perhaps their ire is more intensive this year as money managers and hedge funds have for the most part significantly underperformed their benchmarks.  I'm going to write more on this after I'm back in Chicago, but for now I'll say that for most of these folks their playbook, worldview and the way they were taught the investment business, isn't working right now. I'd venture to guess that most of them haven't quite figured out yet what to do about it.  Again more on this at a later date.

What's been propelling the markets lately besides extreme negative sentiment?

You read the research, go to the internet and talk to business people there is a palpable sense that things are a little better.  Perhaps not to the point of seeing the economy print something like a 3% GDP number, but the sense that maybe this corporate earnings trough we've been in these past two years or so maybe finally starting to turn a bit.   Who knows, maybe this budding sense of optimism will turn out to be just another false lead but for now it's there.  If corporate earnings start to come in better than estimates then those high multiples we have on the stock market may start to look a bit better as well.

Better growth consensus also seems to be percolating around the globe and not just here in the USA. Brexit didn't turn out to be the end of the world.

The market has now more than even a few weeks ago discounted a Clinton victory.  Of course if that is the case then stocks have the potential to become more volatile should that consensus start to be doubted.

Along with the negative sentiment are very high levels of cash in both institutional and individual accounts.  

Broad participation by different sectors of the markets.  This is a huge difference as most stock leadership through most of 2015 was very narrowly focused.

Now you should know that we are in the "dog days" of August. I can tell you that in the east coast money centers of Boston and New York,  folks in the investment business are by and large mostly interested in their tans right now.  They're just hoping we don't have some sort of crisis that forces them to leave the beach for the office.  Therefor none of this might matter because the big dogs may come back after Labor Day and hit the sell button.  Also we're likely not completely out of the woods regarding the economy or the election.  But for now stocks bleed sideways or they bleed higher. What worried investors six weeks ago is now largely forgotten, a bad memory on an August breeze.  It's summertime and the living as they say is easy.

Stay tuned.