The monetary 'intersections' continue to collide, domestically as well as globally, as fiscal and fundamental realities differ from pressures to ease. In a sense there's an 'inconvenient truth' of a domestic economy now showing 'green shoots' that I've sniffed-out emerging from the sluggish doldrums we rightly projected over the preceding year and a half, versus the majority of analysts continuously looking for an elusive 'recession'. 

Yes, certainly there are some factors (including war or a complete collapse of trade relationships) that could cause those emerging signs of growth in a few areas to recede (sort of like a groundhog poking its head up seeing a contraction shadow, which might be fleeting or not).  

Yet a great many stocks have been so defensive this year; that the surprise could be those indeed do see more persistent advances (in-event of a trade reconciliation with China, and of course a quick settlement of the brewing or uncorked latest trade skirmish with France.. the President repeatedly sang the praises of California wine; while smiling as he noted he doesn't drink at all). All year I've mentioned the prospect of trade tussles with Europe (more so after we cozy-up to the UK after Brexit is completed; presuming it shall of course occur). However, I thought Trump would try to defer this until after a deal is done with others; and at the moment we just have the USMCA deal. 

Now, even President Trump expresses doubt a China deal is indeed on-tap soon; which is interesting since his 'team' held that up days ago to support the stock market when queried (ahead of their trip to Beijing this weekend, of course with meetings starting Tuesday). The President's reasoning about no deal coming yet, is of course tied to his personal political fortunes, and the way he expressed it is disconcerting; 'as if' he wants lack of a Deal as a political talking point; which it really won't be if he doesn't get this done. In a sense he's threatening the market, and everyone, that 'only' his reelection is an assurance of a deal... I'll not expand on that thought for now.  

Anyway, should real progress with China emerge (not merely a dragged-out talk series); then sure, the market pokes a bit higher. Mostly this realization persists, that oddly, conservative yield seekers are pushing stocks in risky fashion for the big-caps (if you believe they're investors and not leveraged hedgers), while more aggressive normal investors are existing for sidelined cash, based on the money flows that inhibit the broad market. At the same time, if we do get a thrust on China dealing (it won't be on a Fed cut alone), you could see the overpriced FANG+ stocks generally softer soon thereafter of course (after the fling). One note: if Apple actually announced building a plant in Texas (the President suggested that; Tim Cook has said nothing), it would help of course; especially coming in a mediocre earnings week?  

But the point is there's now a 'collision' of central banks trying to generally harmonize their policies, putting a degree of pressure on the U.S. Federal Reserve, which itself is divided now as to whether or not they'll cut rates at the upcoming meeting. (We say they'll probably take-back last Fall's hike, so cut by 25 bp; but don't really need to do anything; and it won't achieve more than 'pushing on a string' anyway, in the manner I've often discussed).  

Housing and a constant shifting of big-money out of equities and into bonds continues, and is its own longer-term risk of course. (Incredible how that's a limited inhibitor of broad market action; but doesn't impeded overpriced type stocks. But on the other hand the way they swing shows that traders, at this point, aren't really investing but trading volume and spread as noted).   

Regardless, the folly of monetary policy (whether or not politically influenced despite protests about independence not compromised by Fed officials) has the broader outcome we also addressed: a) reduction of ammunition for any actual crisis in the future, and b) the challenge of servicing debt when, with an inevitable realization of economic growth worthy of the label, difficulties with 'debt service', because the market will raise raise even if the Fed does not move; plus c) this will be a global macro issue down-the-road to clearly recognize, while d) it is not the catalyst to crash markets at the moment.   

 In-sum: the 'trade war' is holding back the economy somewhat. Uncertainty is the issue on the backs of every CEO involved in importing components or more heavily involved in overseas production or multinational marketing on a very large basis. It's inhibited a lot.  

The importance is that we take issue with the idea that a recession looms, but rather than the Fed, if it moves, should do one-and-done, as there is no emergency and there is no heavily restrictive or tighter policy environment.  

It might mean that the Fed, in their Statement; does something the market is not looking for: they might cut a bit; but then give no indication of additional moves in that direction. That's perhaps a long-shot, but it would contradict the overly-dovish expansive policy intentions Draghi announced this week for the ECB in September and beyond; but it would make more sense, at least for the United States.  

If there's any reason that certain people (like Mr. Kudlow) depart from their own historical perspectives about such policies, well that would be political. Meanwhile a cut is already priced-in; so this may continue to set-up sort of reflective reactions that could be higher and then lower (with a bit of battle). It also occurs in the midst of the higher-level trade talks with China. So.  

Bottom line: The risk is that the Fed won't have much to throw at actual bad times; which is already where Europe is at, and their impotency to generate a recovery there, should be noticed by those deliberating about this here.  

The stock market remains in-flux and on-top of a pattern with limited upside potential; and lots of risk; even though there is the prospect of temporary or reflective relieve rallies, in-event of actions viewed favorable especially with regard to China, since the Fed's cut is priced-in, while the Fed hinting they are done absent a serious economic slippage, isn't in the mix. Of course if a Fed with backbone should say that, and the China talks fall apart (hopefully not the case) then the stock market is ill-prepared for downside risk.    

Regardless of our ongoing suspicion beyond these daily moves for retreats or corrections (especially for the S&P); perhaps after progress with China; it does not appear that the upside extension is as dangerous and inviting for short-sellers as what we had in January or September of 2018, for instance. Elements are there, but it's not so clear to be term 'bubblelicious' for now.