What is Going On?

“The DOW rose 62 points, ris(ing) about 8% through the first six months of the year”

“The SP 500 also gained about 8% this year”

“Nasdaq has easily outperformed the DOW and SP 500 this year, surging more than 14% and logging its largest first-half gains since 2009.”

Okay, so not too concerning. The market is moving up, because the “data have been good” according to Mike Baele, managing director at US Bank. He also says that “earnings and the forecast for the rest of the year are pretty good”.

Sounds great, right?

Everything is wonderful!

Except it isn’t.

There’s no way that the market can continue in this trajectory, especially considering the volatility in the marketplace from the new administration and countless other things. Things are just insane.

“Tech has been the best-performing sector for most of 2017, rising more than 15% in the period. But over the past month, it has dropped more than 2%.” This type of growth in an otherwise stagnant economy is simply unsustainable.

So why is all of this happening?

Read between the lines.

“Financials are one of the biggest dividend-paying sectors”

“First time in the seven-year history of the (stress) tests that all banks have passed.”

“The banks also recieved a big boost after the Federal Reserve cleared capital returns programs for the big banks.”

Someone’s nose is going in places it doesn’t belong. The entire market is papered over with redrawn regulations, inflationary techniques, and overbought companies looking to cushion their own pillows.

It’s like a the game of Jenga. When you keep taking out different pieces, it’s going to start to wobble. You can either attempt to replace those pieces (i.e. create a better social security system, pay off some debt, rewrite the tax code) or you can keep taking pieces out (i.e. messing with Russia, taking out more debt, wasting time on senseless regulatory measures) and the tower will start to wobble. It might not fall down, but if it does, it takes a long time to put it back together.

So it comes down to this: do we keep on taking blocks out of the tower, or do we focus on rebuilding it so the entire infrastructure doesn’t fall apart? There is an easy answer and there is a right answer, but some answer needs to be chosen soon.

Disclaimer: These views are not investment advice, and should not be interpreted as such. These views are my own, and do not represent my employer. Trading has risk. Big risk. Make sure that you can balance your risk/reward, and trade small, and trade often.

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