The economic calendar is significant, but fundamentals are taking a secondary role. The Friday Presidential tweetstorm raised uncertainty on trade, the global economy, Fed policy, taxes, and traditional alliances. Attention now turns to the reaction. Can the widespread negative feedback alter President Trump’s course?

Last Week Recap

In last week’s installment of WTWA, I focused on the recent inversion of the yield curve and the upcoming meeting in Jackson Hole. That was a good guess for the top market issues until Friday morning. With Chairman Powell’s speech in the books and markets calming, the tweets began. The trade war moved a notch higher, and that was only one of many issues.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week I am featuring Investing.com’s version. The tags show news events which you can see by visiting the interactive site.

The market lost 1.5% for the week, but if felt much worse. Early gains were erased on Friday. The trading range was 3.6% mostly in a single day. My weekly Quant Corner translates this into a volatility calculation which you can compare both to VIX and to past readings.

The Calendar

The economic calendar is a big one, with housing data, personal income and spending, and consumer confidence. The following week will be even bigger, with many returning from vacations.

Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.

Next Week’s Theme

Despite the significant economic calendar, the President has set the agenda. Expect the punditry to focus on reactions to his most recent actions on trade, taxes, and foreign policy. Pundits will be asking: Can the chorus of protests alter the course of Trump policies?

It is early to speculate about this, since the G7 meetings and weekend talk show reactions will be part of the story. We’ll know more on Monday or Tuesday.

I’ll have my own observations in today’s Final Thought.

Quant Corner and Risk Analysis

I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update, featuring the Indicator Snapshot.

Short-term technicals remain mildly bearish and are trending worse. Long-term technicals deteriorated to neutral. Recession risk is still in the “watchful” area with the odds up a notch. We are seeing little confirmation for the risk signals, which we have been monitoring since May. The 2/10 temporary inversion is not the best measure, so it does not affect our estimate. It is also important to look for confirmation rather than blindly following a single indicator.

Considering all factors, my overall outlook for investors remains bullish. The opportunity is very high, but the risks are also rising.

The Featured Sources:

Bob Dieli: Business cycle analysis via the “C Score”.

Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.

RecessionAlert: Strong quantitative indicators for both economic and market analysis

Doug Short and Jill Mislinski: Regular updating of an array of indicators. Great charts and analysis.

Georg Vrba: Business cycle indicator and market timing tools. The most recent update of Georg’s business cycle index does not signal recession.

Final Thought

Market fundamentals did not change much last week, nor did most stock valuations. The Friday plunge gave a panicky feel to things but even that was the typical algorithm-sparked move and technical reactions.

How real is this selling? We are still at a point where policy changes can have a big impact. Most will find it difficult to chase a rebound. This is exactly the reason why my weekly column has emphasized volatility, strategic planning and being prepared for these wild swings.

With policy decisions the most important market issue – by far – we must know what might constitute good news.

Back-door pressure from GOP candidates and contributors plus a face-saving, victory-declaring exit constitute the best possible outcome. This is getting more complicated, since China will need a similar result.

When there is an eventual agreement, claimed as good by everyone, it is likely to be something none of us imagine right now.