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.