An agnostic perspective might be the most realistic daily-basis view just for now, within context of our evolving (anticipated) defensive market beyond the rally called-for (from June) into mid-July. Any sneeze can shift the winds.

Freepik

Deflationary forces from China are not the big concern, rather inflationary and disruptive winds during Hurricane Season are more of a domestic concern. In the longer-run, yes, lower prices on mass-market goods (such as from China) could help consumer prices, but matters more to China's economy than ours.

So yes, given little choice as China expands to stimulate their flagging society from utter collapse (mostly real estate but also heavy youth unemployment), it is conceivable China eases things, stops degradation, and perhaps increases a bit of Oil demand. But higher Oil prices definitely add to inflation, and we're thinking that's feasible simply based on brewing storms coming to America.

Most believe only 'tech' can be a positive or negative catalyst moving markets in this scenario, and I sort of agree (optimistic eventually on semiconductors), but believe that very near term Oil prices are more significant, since demand, at least in tech, is already widely presumed to have slowed down...temporarily.

I will call attention to almost all semiconductor CEO's who widely emphasize better prospects in the longer term, and point-out need to ramp-up facilities for Silicon Carbide an Gallium Nitrite 'now', before demand perks-up in 2024-'25.

In-sum: 

This a mixed defensive environment, we continue to envision cash as useful to accumulate stocks desired for late year and/or 2024 appreciation. In a few instances the lows may be behind, but yet-ahead for other issues.

The sovereign debt and bank downgrades didn't help but Summer Dog Days of course were our were expected, and so far it's a garden-variety correction in a sense, primarily because the breadth never got so good as to elevate most of the depressed stocks, which generally are flat-on-their-backs or nearly so.

It's a market where macro circumstances could still culminate with cascading drop(s) especially if 'weather' contributes to higher Oil & Food costs, not really 'whether' the Fed sees the sticky aspects of inflation as within their control (in a sense that's hubris on their part). Perhaps NOAA (hurricane specialists) can more reliably forecast how this unfolds, but their record isn't so perfect either. I think this simply our expected retraction after so many capitulated from bear to bull, and it has to run its course.

July FOMC Minutes came out, talking of slight slowing, but 'upside risks' to inflation. Yes talked out of both sides, uncertainly with 'significant disinflation' in some areas, but below trend growth with higher prices in other sectors.

Sounds about the same as Chairman Powell's last 'Presser', and that's ideas of yet-one-more rate hike, though personally I see it as counter-productive as well as a bit risky. They cannot atone for largely triggering the inflation after a miserable handling of monetary policy until the nadir of the pandemic, by just being persistently hawkish now. Plus inflation is aggravated by Oil prices.

Tentative signs of economic cooling, along with diminished inflation, is what is looked for by the Fed. They don't want economic acceleration or prosperity.

What's happening 'macro-wise' is ambivalence on the Fed's part, momentum absent on rebounds generally, and stocks reflecting monetary policy or seems to ebb-and-flow between hawks and doves.

The market has been relatively calm for a seasonal decline and believe it or not this treadmill will continue for awhile longer, little alternative.

However, the S&P 500 can break and then become overdue for at least a 'Hail Mary' snapback, even in the context of the ongoing downtrend, per the August/September forecast defensive evolution.

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