Today’s post is from Peter Essele, a manager on Commonwealth’s Investment Management and Research team.

Today's post is from Sam Millette, a fixed income analyst on Commonwealth's Investment Management and Research team.

Eagerly anticipated by all, it’s time once again to award the Bubble of the Year statuette, affectionately known as “the Bubby.” The award is a long-standing tradition, dating from yesterday afternoon, when I spent some time contemplating the day’s bitcoin pricing. With bitcoin up roughly 50 percent so far this month—and increasing significantly during this past year—we must ask, “Is this a bubble?” And if so, “What exactly is a bubble?”

Today's post is from Anuradha Gaggar of Commonwealth’s Investment Research team.

Earlier this month, capital markets declined sharply at the very hint of rising tensions between the U.S. and North Korea. Now, it’s not surprising that many global citizens would be fearful at the thought of nuclear war and the far-reaching social, political, and economic effects that could result. What may be surprising, however, is that capital markets have historically been much more stoic in times of war.

Brad here. Today's post is from Sam Millette, a fixed income analyst on our Investment Management and Research team. Over to you, Sam.

Last week, several important economic data points were released, covering major components of the economy. Much of this news came in better than expected, and the overall economic picture suggests accelerated growth in the second half of the year.

In thinking about the market over the past week or two, what has really struck me is how truly remarkable the market’s behavior has been. After the U.S. president implicitly threatened nuclear war, the market dropped, of course—but by less than 2 percent—and then it bounced back. Today, after CEOs from big-time companies essentially abandoned the White House, the market is down—but by less than 1 percent. We’ve seen more political drama in the past couple of weeks than we saw in years under some administrations—and the market is just sitting there. What’s going on?

Recently, many readers have asked me about where the market is, as they are worried about what to do with their portfolios. The gentleman behind the grill at the café where I get breakfast, who knows what I do, has the same questions for me. Advisors want to know what I think about gold as a risk reducer. Almost every day for the past couple of weeks, I have heard about the nervousness. People are getting scared.

Yesterday, I wrote about mistakes I’ve made in the past and how I am using that experience to avoid being as wrong—at least in the same way—in the future. So, you can certainly see why a book with “How Not to Be Wrong” as the title appeals to me. The subtitle, “The Power of Mathematical Thinking,” is also attractive, as math is one of the great organizing principles of my profession. On the face of it, this sounds like exactly what anyone in my position should be looking for.

I received a really interesting e-mail from one of our advisors the other day. He asked me to identify instances when I had been completely wrong about something, why I had made the mistakes, and what I had learned from them. He was looking for ways to better himself when it came to thinking about the future—a goal I totally endorse.

Last week, the only major economic report was on consumer prices, released on Friday. Overall, this month’s data suggests that inflation remains low but is not dropping further. Therefore, the Fed will remain watchful, and it isn’t likely to increase rates in September but may well start the balance sheet reduction program.

After three consecutive days of market declines fueled by tensions with North Korea, the major U.S. indices were up on Friday. Is recent performance simply normal market action, or is it a sign of something worse to come? 

Events of the past couple of days have me thinking about the entire concept of normal. “Normal,” by definition, means “usual, average, or typical.” It’s a good definition. But when you actually apply it to what we see around us, that definition makes you consider whether the current “normal” meets those conditions—and thus deserves the term.

After a dip and recovery yesterday, the markets were down this morning. It is clear that the developing situation between the U.S. and North Korea is rattling financial markets. Should we be worried? If so, what should we do?

Ten years ago today, the global financial system started to crack with the decision by the French bank BNP Paribas to block withdrawals from hedge funds that invested in U.S. mortgage securities. That, as we now know, led to a widening crisis of confidence over what securities were really worth, which in turn called into question the basic solvency of many financial institutions. Unable to know who was safe—or what collateral was worth—the financial system went into gridlock, leading to the crisis we have been recovering from ever since.

Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. Let’s take a closer look at all three to assess what the risk levels look like this month.

We saw a wide range of economic news last week, including a detailed look at consumer income and spending; business confidence in both the manufacturing and service sectors; the international trade report; and, most important, the July jobs report. While there are some areas of concern, the jobs report suggests that the recovery continues.

July’s data was largely positive, with improvements in employment and consumer confidence leading the way. With unemployment at a 16-year low and no signs of slowing, the strength of the labor market is continuing to power the current recovery. While business confidence showed some signs of softening, overall conditions remain healthy. 

It seems like just a couple of months ago that I was writing about record highs for the Dow. In fact, looking at the data, it was only a few months ago, on January 26, that I wrote about Dow 20K. Reviewing that post, it notes that I last discussed stock market records 58 days before that. Are we seeing a pattern here?

July was another great month for the markets and economy. U.S. and developed markets were up, due to the simple fact that companies are making more money. Earnings came in much better than expected, U.S. job growth was strong, and wage growth picked up. Plus, both consumer and business confidence are on the rise. Clearly, there is positive momentum going forward.

Last week gave us another look at the housing market, with reports on sales of existing and new homes. Also, the durable goods orders provided a window into industry and business confidence, while the first estimate of GDP for the second quarter revealed the growth of the economy as a whole. Overall, the news was mixed but positive.