Breakout or Breakdown: Why the Next Two Weeks Will be Critical For the Rally, June 30, 2017

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We’re coming to a bit of a fork in the road here in markets and the economy.

The market appears to be accepting the reality that even with some lackluster economic data, global central banks are going to remove stimulus and tighten financial conditions. So now, the economic data becomes very important.

On one hand (this is the bear’s scenario) if the data stays middling (but not bad enough to warrant central banks to get dovish again) then stocks could be in trouble, with similar price action to what we’ve seen this week. Put broadly, that’d be a global rising rate environment with slow growth and stagnant inflation, which won’t be great for stocks, especially when they are trading at 18X next year’s earnings.

On the other hand, if economic data (growth and inflation) starts to accelerate, then we’ve got renewed reflation, which will be positive for banks, small caps and cyclicals. And, they can power this market higher after a period of volatility (like we’ve seen this week).

Once again, we get a lot of important economic data over the next 10 days that will help decide which “fork” the market takes. It’s the middle of summer, but now it’s time to pay attention, because there will be potential opportunities coming out of the next two weeks of data and news.

It’s also a good time to sign up for your free 2-week trial of The Sevens Report.

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