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The “Heat Map”

July 18, 2016 | Weekly Commentary

Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: This grade is A- (very favorable). Favorable activity in the housing market continues to support growth in the level of spending.

THE FED AND ITS POLICIES: This factor is rated A (very favorable) which is an increase from the previous week. Economic reports indicate the U.S. economy is improving. Because of BREXIT, international turmoil, and the strong dollar, the Fed will not raise rates for the remainder of 2016 (more likely than not).

BUSINESS PROFITABILITY: This factor’s grade is a C- (below average). During the upcoming month, corporations will release their second quarter corporate-earnings reports. We will monitor this closely for possible upgrade.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 4. These risks deserve our ongoing attention.