Well, technically-speaking, you could. Yesterday saw a late-session wipe out that took the oversoldness of the market to extremes, and we had the kind of breadth that smelled of the classic capitulation that often signals the all clear.


Problem is, none of the near-term headwinds we listed in this week’s message have measurably abated. 


Sure, banks issued good earnings, revenue and even outlooks this morning, but that was to be expected. However, while — unlike industrials, materials and, ultimately, tech — banks aren’t directly in the cross hairs of the U.S./China trade dispute, JPM’s Jamie Dimon, in this morning’s media call, had to acknowledge the potential macro risk it presents:

“The U.S. and global economy continue to show strength, despite increasing economic and geopolitical uncertainties, which at some point in the future may have negative effects on the economy.”

But he also said:

“Eventually we’ll have a trade deal with China” 

Our view is that if that deal occurs while macro conditions remain strong, the bull market has a ways to run. Operative words being “while macro conditions remain strong”. 


In the meantime, here again is our list of near-term concerns that should have you not ordering the kegs and breaking out your rally hat for the weekend end-of-the-pullback party:

 1. While Q3 earnings reports will reflect the strong profits that come with strong business conditions, I expect that they will be marred notably by uncertain outlooks due primarily to global trade concerns, which will exacerbate the otherwise typical inflation concerns that accompany a mid/late-stage economic expansion. 

2. Rising inflation, as noted in #1.

3. An appropriately hawkish Fed (read rising interest rates).

4. Iran sanctions taking effect on November 4th, thus hampering the distribution of the world’s fourth largest store of oil reserves. I.e., higher prices at the pump are likely during the coming holiday shopping season. 

5. Uncertainty over mid-term elections. 

6. Coming to terms with a slowing global economy and the inevitability/realization that the U.S. is in no way immune to the conditions impacting the other 96% of the world’s population.

7. The real potential for further deterioration in U.S./China trade relations. 

The present macro backdrop, however, should not have you cancelling next summer’s vacation (or abandoning your equity positions) either.