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.

Once more we have news from Washington that suggests the Republicans will not be able to move forward on a core priority—health care reform. You might expect political dysfunction at this level to disrupt the markets, but apparently you would be wrong. The markets are down a bit, but not much, and remain within 1 percent of the all-time high. What’s going on here?