Aspirational investors  are stunned by the market segmentation with little if any feel for seasonality; liquidity sources; or external influences. Sure, we can well see a so-called 'Summer rally'; if circumstances work out optimally; while of course the consideration about taxes (and Covid) may influence prospects.

This is all in context of increasing corporate taxes, as might 'sterilize' stimulus impacts on the markets and economy too.  As upward influences are mitigated you lose some of the tailwinds which supported our S&P move of over a year.

At the same time there might be upside in muni's and other areas 'if' we get a run-up in rates (officially the Fed defies that; but they're not the entire story.. a huge part though.. when it comes to credit markets). Financial engineering by the Federal Government is meddling beyond what we need to achieve; and of course there's a risk (eventually) of 'capital' going on-strike if serious taxation moves occur; that are unlike a tax act of decades ago which raised corporates but actually lowered individuals, including capital gains; stoking the economy.

This would be a huge change if legislated in the way it was presented; and is unlikely to emerge that way; but the market can be reticent until it's clarified a good bit more. Remember; the devil is in the details, which aren't known yet.

Executive Summary:

• The past week was basically neutral finishing about the same as the prior;
• Earnings dominate the coming week; with 5 of the largest contributors to price and volume reporting (including Apple, Facebook and Microsoft);
• It becomes essential that most (if not all) make their guideline estimates; and it will be revealing if there is much 'selling on the news';
• Markets remain extended and are kidding themselves if they think all is in good shape with the coast clear just ahead (wish it was; but be realistic);
• The Bloomberg Agricultural Spot Index just surged the most in 9 years; so who doesn't think that's going to translate into higher basic food costs?;
• Combine the insanity of rapidly rising base level wages (insane because it will be hard to moderate those after September when temporary relief the Government provided -causing the issue- expires); and well.. it's inflation;
• Emerging markets are suffering even more (paltry wages and high cost of food and basic raw materials now); plus they have Covid; that's a formula for chaos and despair; more than anything we've seen in the West;
• Those poor countries become more unstable; with political implications (a huge example is India; besides the most Covid cases daily now; leaders completely failed to properly prepare even with Covid on the rise; oxygen lacking is but one example; big trouble and few vaccinated;
• Geopolitically things calmed for the moment; Russia backed-off Ukraine; and we backed-off Black Sea exercises; however President Biden today acknowledge the 'Armenian Genocide', which many promised to do; but didn't; we'll see how this sours relations with already-rocky NATO member Turkey (and we weren't happy since they did the S-400 deal with Russia);
• China, that I still believe 'inadvertently' unleashed their Covid bio-weapon, is doing pretty good; apparently their vaccine is actually fairly effective; on another aspect, I still want to retaliate against the Communists for the CCP audaciously daring to personally attack me (I'm teasing of course);
• Here the release (with warning) of the J&J vaccine (without discussion of the filth found in the Baltimore plant) reflects money already spent on it as given more vaccine than demand at this point; why would anyone chose a questionable J&J over Moderna or Pfizer?;
• This week Inovio lost Defense Dept. Phase 3 INO 4800 support; and the stock cratered; 4800 will likely complete and be a big international seller as a DNA vaccine; we do not own the stock but have been watching it; if you do own or buy I suspect it's low risk now;
• In-sympathy Sorrento sold-off because the uninformed thought the Darpa (also Defense Dept. $34 million) was for vaccine testing; no not at all; the funding was monoclonal antibodies (testing should be complete; I cannot understand the lack of timely updates or progress -or lack- reports from a company already controversial, but with so many potential solutions);
• The point of monoclonal antibodies for DOD was as a 'countermeasure' in an immediate response need (such as deployed troops); not vaccine that takes a couple weeks to build immunity; a nasal spray or pill would attack and kill Covid immediately;
• I've called for that for a year, knowing the politics were favoring mostly the big-pharmas vaccine approaches (I am aware of how that delayed, rather than enhanced, prior epidemics; as a multi-pronged approach confronting a pathogen gives more prospects of success in corralling the invader);
• Finally, I suspect that the dramatic up-down reversal in crypto speculation was not merely as anticipated (even in the hospital I thought it was crazy how many were asking about investing in it; typical when the game's at an end not anything else); but I think contributes to sobering the fervor many had in trading in-general; at least for the short-term;
• On a more conventional basis as noted days ago; the prior week's action saw significant draw-downs by BofA/Merrill clients; if that's indicative.

In sum: we all know where the market stands; and I'm glad we encouraged not 'fighting the Fed' or shorting the Indexes over the past .. more than a year.

That will change 'soon' for traders (it already has for scalpers); however there is no change in my view that correction at most would be intermediate scope; and not a catastrophe. I do believe that if a serious push toward insane taxes (not reasonable compromised dealing) dominates; then risk will be enhanced.

I do want to emphasize my point about emerging countries struggling more as prices climb dramatically.  A relentless rise in prices acts as a misery multiplier, driving millions deeper into hunger and desperation. Blame central banks for a fairly ubiquitous expansive global monetary policy; and add drought to that, which fools continue to pretend isn't related to climate change.

That's also near the heart nobody speaks of regarding the Central American migrant exodus; it's not just Biden or Mexico or even the upcoming VP Harris trip to the region to assist with funding education and police. If that's the focus they'll miss the point: the region is largely not the 'tropical isthmus' of history; but becoming a desert.  Crops (mostly corn) can't flourish and people starve. It is not as much political as it is practical. You can't eat even political reform. If there's a solution I don't know what it is; and now hurricane season looms.

At the same time here in the U.S., 'finally', you hear more about coastal tides, and the Washington DC tidal basin likely being under water in years. Well yes; and the time for action was a decade ago; although of course things will work to save Washington. In Miami it's another story since the subsurface is porous limestone and water will undermine and seawalls they construct.  Already their water supply is being infiltrated by sea water; hence it's 'brackish'. The irony is many in New York and high tax states are moving to Florida; the smart ones I think will avoid Miami and chose (even coastal) slightly inland areas with a bit higher elevation. (One of the worst flood risks is downtown Tampa because of the Bay; in hurricanes it would push right up into the City. Tampa and Orlando are about the fastest growth areas now; especially for business.) (Naples and Sarasota are of course appealing for retirees; not just the inland 'Villages'.)

The new week must hold together and be impressed by earnings. That's not so easy considering that everyone expects good numbers; and prior gains of stocks obviously discounted the companies coming through. So be cautious.