A neutral consolidation amidst signs of hope for economic normalization sort of dominated the end-of-week activity, with unspoken tensions remaining going into a military weekend, both in Ukraine/Russia and the Middle East.

After the anticipated rebound of the past week, we saw positioning seemingly ignore the geopolitical factors, with a focus on relatively benign consumer or average economic activity shifts, with mostly the usual mega-cap leaders just controlling the moves, as they were quite alone as being 'back in the saddle'.

That matters, after the seven-session winning streak dominated by those very pricey leaders, it's almost as if 'whatever active interest prevails', had to push those stocks higher, otherwise the rest of the market would have little chance.

I think that's somewhat seasonal and necessary thus far, given that little fresh cash 'normally' comes into markets this time of year; and it must exit 'bonds' or have another source (like no free money lunch in Japan any more) to get a move going, which extended itself every bit as far as anticipated, and even a tad more for the S&P Index, although certainly not for average small stocks.

Market X-ray: all this implies 'hope' that earnings growth is broadening well beyond the technology giants that dominate the leadership, but generally that is 'not' reflected in price levels; so either the assessment pushing the S&P is not fundamentally valid, or (more likely) the smaller stocks move is pending.

Personally I don't think much is imminent in small-caps and should not be this time of year; partially because the big money managers won't focus on the sectors in general until you get more ammunition to push smaller businesses; and of course that can relate to the Federal Reserve cutting rates (by September). I say 'by' September, as they could at an interim meeting this coming week, but that's unlikely. In fact the relative economic 'normalization' would tend towards their believing they have more time to see more data.

Biggest weekend concern was Hezbollah attacking Israel and counterattack by Israel. However, continued Gaza negotiations are set for next week, so there's that. We say tread lightly.

Most Americans don't feel the so-called lower prices (interesting as politicians talk about lower, when it's mostly prices still increasing but at a slower pace). I appreciated Kamala Harris reckoning they reversed inflation; but more so her proclaiming a focus on cutting regulatory red-tape and sponsoring innovation.

I would like to hope that 'either' new Administration would focus similarly; and build the middle-class to once-held enviable status in this Country. I also noted Wolfgang Puck remarking about the high-menu price resistance being higher at his MGM Grand (average check he says about $60.) versus his Palazzo (it is perceived as more upscale and he says average check is about $150.) I'd say both are high, especially if that's without cocktails or wine; or about twice what the middle-class would perceive as per-person dining-out. He mentioned price resistance and gently nodded to 'Vegas being too expensive. No kidding as it's not the old days (some hotels dare charge for parking, gamblers drinks or even lounge chairs at the pool.. wow what a change). I did enjoy hearing of LA's Spago still going; I was there 40 years ago after it opened on Sunset; ah memories (if I digress I'd mention La Dolce Viata, La Scala and Scandia...).

This coming week we have the Jackson Hole Conference; where we'll get at least a hint of what the Fed intends to do in September; although we sort of have it now. We do have the market and the Fed reasonably aligned now; as they debate the trajectory ahead (which should be a series of rate cuts and of course better smaller-cap performance which historically follows).

So you have a market that's 'overstating' the lack of recession probability (that is because of the bifurcated economy and citizenry basically). As to the S&P, it is thought by some that it overstated the weakness in the economy; but in reality the decline and automatic rally (a term coined decades ago) reflected other factors, even if analysts aren't crediting the Carry Trade and algo-selling adequately. But that's fine, it means they were caught bearish or short just in time for the expected rebound to fill the gaps above, and now with rally done, it leaves gaps under. Remember, I'd mentioned the S&P anticipates way more recessions than actually occur. So none of this is certain; but presumably the basics hold together through Elections and beyond; but there's geopolitics. (I still think there are rocky times at-risk in August and September; no change; I emphasize the gaps under; and pending resolutions of global crises .. or not.)

Bottom-line: the market shrugged-off a lot of fears; and little actual news. I am not convinced the backdrop is as solid as some pundits contend. Why? That entire draw-down was not recovered except for leaders; while others did not get creamed in the preceding panic-attack but also didn't bounce much.

Cyclical hiring has been slowing; aside 'massaged' Jobs data, there's not lots of strong indications, if you want to view the 'nuances' the Fed will look at just a few days from now at the interim meeting. It's likely sufficiently mixed that as they often prefer anyway, nothing happens.

As to S&P, the effort is to keep things sufficiently intact to muddle through the rest of the 'Dog Days of Summer', so that the argument of the structure being favorable can persist. I sort of agree that the market movement was based on its own idiosyncrasies, the S&P 5400 technical breakdown, which occurred in-sync with the concurrent Carry-Trade implosion; with little else occurring.

News sensitive to start the new week; probably fairly neutral for the moment absent stunning news (good or bad) from either of the two theaters of war.

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