Don't Be Impressed By Stocks' New High

We've staged a remarkable recovery from the steep two-day sell-off that rocked global markets and currencies last month immediately following Britain's surprise Brexit vote. But while the S&P 500 hit a record intraday high today, this is no time for investors to feel complacent. Instead, it's important to keep the following in mind: U.S. Employment Looks Troubled Last week's word that the U.S. economy created almost 300,000 nonfarm jobs in June was welcome news that put away concerns about the dismal employment numbers that we got for May. But investors should remember that U.S. job creation for the second quarter as a whole was significantly below first-quarter levels -- which, in turn, were noticeably lower than those of 2014 and 2015. And while it's nice to see U.S. wages growing at their fastest year-over-year pace since 2009, I think the overall job picture is merely OK for this late in the business cycle. Strong Dollar, Weak Corporate Earnings Despite the S&P 500's nice rally over the past couple of weeks, the corporate-earnings picture hasn't gotten any better -- in fact, you could argue that it's actually gotten worse. After all, the U.S. dollar's rally since the Brexit vote will just create bigger headwinds for S&P 500 earnings. We remain locked in a profit recession, and the market was already expecting the second quarter to represent the fifth period in a row where S&P 500 firms post year-over-year earnings declines. The strong dollar is also one reason why oil has dropped from about $50 a barrel to more like $45, while the muscular greenback is pressuring other commodities as well. This is a key reason why neither energy firms nor emerging markets have participated in the recent worldwide rally. Global Growth Looks Weak The Brexit is hardly done rippling through the global markets and economy, especially in Europe. For instance, some experts have already cut their Eurozone growth forecasts by half a percent to account for the impact of Britain leaving the European Union. It's also hard to see much growth coming out of Japan despite the fact that this weekend's election victory by Prime Minister Shinzo Abe's party ensures that Abenomics will continue. And I expect emerging-market growth to remain punk given the low prices for oil and other commodities. U.S. Growth Only Looks So-So Things look a little better domestically even if we remain mired in below-trend 2% growth. That's one reason why I think investors should overweight U.S.-focused small-caps with little or no foreign exposure. I particularly see some good value in stocks tied to the U.S. housing and construction markets, like homebuilders Lennar , LGI Homes and Taylor Morrison . However, things don't look all that rosy given the fact that we face what's likely to be the most contentious, nasty presidential election in our lifetimes. After all, both major candidates sporting unfavorable ratings north of 50%. Add in other increasing societal animosity that we're seeing and it feels more like 1968 by the day. So, you can hardly feel great about the U.S. economy's prospects. The Bottom Line Given all of the above, I've used Wall Street's recent rally to raise some cash by selling stocks that have hit my price targets and selling just-out-of-the-money calls on positions that look fully valued to me. After all, I think there will be better buying opportunities ahead in what could be a long, hot summer.

Don't Be Impressed By Stocks' New High

The S&P 500 might be hitting a record, but tons of problems remain.

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