The Driving Force Behind The Current Action Is...

One of the most important lessons I have learned about the business of investing is the drivers of the market action change over time. Sometimes dramatically so. It is for this reason that no one, I repeat, no one, has ever perfected the game for any length of time. You see, like golf, the conditions under which one plays the game are always changing.

Think about it. There are times when the news and/or external events drive prices to and fro. Other times the central bankers are the focus. Sometimes it's the economy, inflation, and/or interest rates that cause traders to take action. Often (but not always) it's the earnings outlook that controls the game. And every once in a while, valuations are the primary driver (think Spring 2000). Oh, and lest we forget, there are even times when pure, unadulterated fear becomes the impetus for Ms. Market's machinations.

What Are The Current Drivers?

To be sure, the current rally has been a thing of beauty for stock market investors. Yet at the same time, for anyone following the global economic data, the move has become more than a little confounding.

So, the question of the day is, what is driving the current joyride to the upside - and can it last?

As I opined with my tongue firmly implanted in cheek last week, stocks seem to be rallying on the back of two assumptions. First, that the Fed is an investor's best friend again (i.e. The Fed is on hold, the next move could be more QE, and the "Fed Put" is back). Second, it is assumed that a trade deal with China is going to get done soon, and the deal is going to fix all that ails the world's fledgling economies.

With these two big "worries" out of the way, it is not surprising that the indices have retraced a fair amount of the fear-based trade seen in December. In short, traders have "corrected the correction" because the fear turned out to be unwarranted. Makes sense.

Has #GrowthSlowing Been "Fixed?"

Yet, there is still the #GrowthSlowing issue to contend with. There can be no argument that both economic and earnings growth is slowing at the present time. Last week's economic headlines both in the U.S. and abroad made this point quite clear.

Let's see... Germany's Manufacturing PMI fell to 47.6. Since the reading is below 50, this means the manufacturing sector is contracting. Export orders saw their biggest decline in more than six years. And the Composite PMI is teetering on the verge of contraction. And with Germany's Q4 GDP came in at 0.1%, it is easy to see that Europe's biggest economy is flirting with recession.

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Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.

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