I am getting rather tired of the crazy weeks we've had of late, and I think each and every one of you will more than agree with me that this long weekend is just what the doctor ordered.
We started off the week with follow-through on the Brexit mayhem from the prior Friday, and then it was a hockey stick up. People have asked me why the markets bounced back so quickly from the two- day beat-down. I have read many opinions and heard just as many from gurus, pundits and swamis all over the place. In my opinion, the absolute brush-off given to the whole "head for the hills, the end of the world is here" reaction to Brexit by Asia was more than likely a stabilizing factor, although not a big one. Investors probably realized pretty quickly that while the British people chose to leave the European Union, the exit still will take a while to play out. Just because of a messy divorce across the pond, people around the world were not going to lie around beating their chests and lamenting the EU's loss.
The second has been a theory of mine for over a year. Our markets have been range-bound ever since the Janet Yellen-led Fed started threatening the world with rate hikes over a year ago. Since then, the volatility has increased and the markets have been ready to faint at the slightest weakness. However, once the fear and anxiety passed, the recoveries have been equally rapid. Now, with the Fed itself lowering the U.S. GDP growth forecast not only for 2016 but also for 2017, investors finally have realized that the Fed indeed has been just whistling past the graveyard trying to talk our economy higher.
With that realization, could there possibly be new break-out highs in the markets? We shall see.
Earnings season is set to begin in a couple weeks, and it likely is not going to be a stellar one, but it hasn't been stellar for a while now. That said, picking and choosing your investments and trades takes on even more importance now.
Thirdly and finally, the Brexit jolt was maybe just what was needed to convince investors that the central bankers of the world were correct in their continued easing mode and that our wrong-way Fed was just that -- wrong-way!
So with continued easing expected from the European Central Bank, Bank of England and Bank of Japan, maybe things were not all that bad from an investment perspective? The icing on the cake is the realization globally that our Federal Reserve is, at worst, on standby for now.
It will not be long before we have our answers -- maybe as early as next week after the long holiday weekend.
Next week brings us very little on the earnings front, though we'll see gobs of economic data both here at home and internationally. None will be more important than the non-farm payrolls report on Friday and China's Caixin PMI on Monday.
However, all that is for next week, and for now it's time to enjoy the rest of the weekend.
With that, I wish each and every one of you a safe and joyful July 4th weekend with your loved ones.