Field Of Stock Market Dreams

The stock market rally has been lacking something over the last several years. Rising stock prices are typically accompanied by rising capital expenditures. But over the past several years, this has not been the case, as capital expenditures have effectively stalled as stock prices have soared to new all-time highs. Looking forward, a long overdue pick up in capital spending will be required to keep the stock market going to the upside. Conversely, if business investment ends up contracting, it would effectively take wrecking ball to the post crisis stock market rally along with it.

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Mr. Creosote Vs. Mr. Market

The stock market is looking full. After nearly a decade of gorging itself at the trough of freely flowing liquidity from the U.S. Federal Reserve, stock prices are surging toward unprecedented levels relative to consumption in the underlying economy. Given the implied excesses in stock prices, one is left to wonder when Mr. Market will take down that last marginal wafer-thin mint before it explodes back to normal.

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The Fed Weathervane

Another day, another parade of speakers from the U.S. Federal Reserve headed to the podium. While their commentary is increasingly falling on deaf ears for the market, thanks to their seemingly boundless propensity to over-hint and under-deliver during the post-crisis period, not to mention the news competing for the headlines out of Washington, it is arguably more worthwhile than ever to pay close attention to what they are saying now that they are finally backing up their words with actual action on interest rates. With this in mind, it is also important to establish a baseline against which the path of future rate increases may be compared going forward.

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7 To Watch In The Week Ahead

It’s a busy week ahead in policy circles. On Thursday, Republican leaders in the U.S. House of Representatives are planning to bring to the floor a vote on the healthcare bill. And this planned vote will come on the heels of what is sure to be headline-stealing testimony by FBI Director James Comey before the House Intelligence Committee as well as the start of Senate confirmation hearings for Supreme Court nominee Neil Gorsuch, both on Monday. And while all of these events will certainly be interesting to watch, the seven people I will be watching closely in the week ahead are those from the U.S. Federal Reserve that are scheduled to take to the speaking circuit in the coming week.

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A Silver Lining

An important data point for the U.S. economy and the stock market was released on Friday. And while the headline for this latest data release appeared disconcerting, a look beneath the surface revealed a promising silver lining for the economic and market outlook in the months ahead.

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