Does one down week indicate the start of some corrective phase in the market? This is the question most investors and market gurus are pondering along with their Kielbasas and beer. The string of four up weeks on the major averages ended with a soft thud. The Fed has indicated they are leaning more towards an ending of the present stimulus possibly as early as the end of June. While it’s a significant statement we do feel that there are some fairly strong signs underlying the US economy and equity markets in general. Housing and manufacturing have been slowly getting stronger and unemployment seems to be shrinking as well. With a continued low interest rate environment, the economy will continue to improve during the summer and the fall. For the short term we still see the markets taking a pause, possibly pulling back a bit as inflows have slowed. Without fresh money, we won’t see record highs again for a while.

That fresh money will flow into the market when there is this much needed mini correction. The money that missed it, will chase it. Happens every time.

The coming week, while shortened, will still present a few interesting data points. We have Consumer Confidence, Case Shiller, revised GDP and Jobless claims. If that isn’t enough in four days we also have Personal Income and Outlays on Friday. While it is a lagging indicator there is so much usual information inside this report you can’t ignore it.
The payroll portion of the report usually gives a clue to upcoming inflation and the Fed takes this portion of Friday’s announcement very seriously. We don’t expect to hear any alarming news that might change Fed policy in the foreseeable future.

To make a bad analogy: We are on freighter that is moving slowly and steadily while the current is against us.