Spring conference season is over. I’m back at the office and happy to be here. Rather than relaxing, however, I am now wrestling with my next big project: preparing an outlook for the second half of the year. What will happen? And why?

Based on the headlines, last week’s data was disappointing. But the details were more positive, leaving conditions pretty much as expected. In addition, despite the weak current results, previous months generally turned out better than initially reported and were revised upwards. Plus, long-term trends remain positive. So, while not a great month overall, it was better than it first looked for these data points.

One of the stories that has moved back into public view is bitcoin. With recent price spikes, interest in bitcoin has spiked as well, as investors try to get in on what looks like the latest hot thing. In fact, the price has more than doubled this year and has gone parabolic in recent weeks: up from about $1,000 in March to over $2,000 recently. What’s going on?

Brad here. Today’s post is from Peter Essele, one of Commonwealth’s senior portfolio managers on the Preferred Portfolio Services^® Select platform. Peter has written here before about a number of investment issues. I think you will find his take on where markets are right now—with special attention to the VIX, which has been in the news a lot of late—is both timely and potentially important. Over to you, Pete.

Yesterday, I talked about the problems that have led to the current surge of populism and ended with a link to a paper discussing the connection between conventional economic policies and political populism. Today, I will offer a look at what this connection might mean for politics and policies in the future and, of course, the impact for our investments.

There’s a lot of political turmoil around the world—here in the U.S. certainly, but also in Europe, Asia, and the Middle East. Much of it seems to involve at least some rise in populist ideas. I’ve been doing a lot of reading and thinking, trying to get a sense of the big picture, where these trends are coming from, and where they might be taking us. Today, I’m sharing my thoughts, along with a couple of white papers that I found both interesting and helpful.

Last week’s data was generally positive, with housing sentiment rising even further and industrial production posting a surprisingly large gain. Although there were weak points—multifamily construction is slowing—growth is broad based and may be accelerating. Overall, the results remain positive looking forward.

I am traveling today and away from my usual data sources. The market seems to be bouncing back, though, so I thought I’d take a break from addressing immediate investment worries in favor of some quick thoughts on a few disparate topics that, believe it or not, are connected by a common denominator.  

U.S. markets have bounced back a bit after yesterday’s decline, but I think investors are still rattled by recent developments. I said yesterday that I don’t think this is the onset of the big one, and we shouldn’t worry. At the same time, it is certainly possible that we’ll see markets fall even further. If it’s not time to worry yet, when will it be?

I am in California, which means that I woke up this morning to a market that was already open—and dropping. Washington, DC is the cause once again. Growing turmoil in the nation’s capital has called into question the ability of the Trump Administration and Congress to enact their policy goals.

Looking back over the past couple of weeks, my overall approach has been one of looking at the big picture rather than the details. And when you do that, the big picture is actually quite good. In many ways, we are in a boom time like we haven’t seen since the 1990s. I know that goes substantially against the narrative out there, and there are important differences. But there are also more similarities than you might expect given the news coverage.

Last week’s data was positive, reversing concern about consumer spending and suggesting consumer confidence remains strong. Lower inflation results were noteworthy but not of immediate worry. Overall, the data suggests that the slowdown in the first quarter is likely to get better—possibly significantly—over the next couple of months.

After writing yesterday’s post, it occurred to me that it would make sense to apply the measures I use for the U.S. to other economies where problems could affect us. Interestingly enough, just as I thought that, articles pointed out that one of my key metrics—the yield curve, which represents how much central banks are stimulating an economy—had just flashed a trouble signal in China.

I have written about this concept before, but given some conversations I’ve had recently, I think it’s a great time to revisit it. When trying to understand both what is happening and (ideally) what is going to happen, we need to be able to identify what is important—and what is not. In other words, what signals should we pay attention to—and what noise should we ignore?

Just as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.

Economic data in April was mixed, with first-quarter weakness lingering in some risk indicators. Overall, though, the news was positive, and most forward-looking indicators we track bounced back from decreases in March. Given the good news in the employment and service sectors, two of the indicators here, it is very likely that the weakness in the first quarter, including March, was seasonal rather than the start of a negative trend. As a result, all of our indicators remain in green-light territory.

Last week’s data was mixed, with two areas of concern, but it also included significant positive surprises. Overall, results suggest the slowdown in the first quarter is likely to get better, possibly a lot better, over the next couple of months.

We’ve been seeing mixed data on the economy lately—even some signs that a slowdown might be under way. But was the slowdown real, or was it just another slow first quarter, which has been the norm for the past couple of years? A weak set of data for March raised concerns even higher, and this week was going to help us confirm what was really going on.  

As of today, it looks like predictions of the recovery’s death have been exaggerated once again.

Warren Buffett has said that he finds living in Omaha to be an advantage, as it distances him from much of the daily noise of the financial markets. Since I’ve been in Hungary at a conference this week, I’m starting to understand what he means.

I’m in Budapest, Hungary, this week at the Commonwealth Leaders Conference. As always, it's great to spend time with such a fantastic group of financial advisors. It is an enormous privilege to be here.

April was another good month for markets around the world. Although worry over the French election weighed on performance, markets rallied in the last week of the month as a centrist candidate secured a spot in the final round. 

Although demand for housing remains strong, last week’s economic data was generally downbeat, suggesting growth is moderating and that chances for a near-term acceleration may be passing. Although general levels of activity remain expansionary, it was a disappointing week overall—and one that starts to call into question future growth.