There are two components to stock markets: earnings and how much investors are willing to pay for them. Recently, much of the commentary has been on valuations, with the implicit assumption that earnings would more or less take care of themselves. Although this has been the case for the past several years, at least on a per-share basis, one of my colleagues and an investment research associate, Sam Millette, recently pulled some figures that gave me pause.

Overall, last week’s data came in generally positive, but in this Monday update, I highlight some economic news in the week ahead that may be cause for concern.

Sometimes, I really hate being right. A few weeks ago, I wrote that the Washington, DC, political environment had deteriorated and that the current go-round on the debt ceiling was likely to be even more contentious than the last one, two years ago. Sure enough, with the resignation of Speaker John Boehner—and the withdrawal yesterday of his heir apparent—the House appears ungovernable. Without some type of Republican internal agreement on at least whom to elect as speaker, it’s hard to see any resolution to the debt ceiling debate, which is likely going to hit in the next couple of weeks.

I wrote yesterday about the economy and how I believe that, while we are seeing some weak data, we are likely experiencing a temporary “snowdown” (much as we saw the past two winters) rather than a true slowdown. Still, we have to ask ourselves, Is the market pullback similarly temporary, or is it the first stage of a deeper correction?

There has been a lot of talk in the financial media about an economic slowdown, with a sense—explicit in some cases—that a recession is a real possibility. Some of that talk, I will admit, has come from me. Given some of the recent bad reports, particularly the jobs report, I do feel that there is a possibility that the trend has changed. After giving it a lot of thought, though, I do not think this is what’s actually happening.

Is Wall Street bracing for the worst year since 2008? Watch my interview on Fox Business Network’s Risk & Reward to hear my thoughts on the state of the markets and hedge fund performance. 

Once again, it’s time for our monthly update on risk factors that have proven to be good indicators of economic trouble ahead.

We have actually seen some moves worth watching since last month, with signs of slowing, although the overall take remains positive.

Although last week started reasonably strong, it ended with a severe disappointment. This Monday update takes a closer look at the economic data.

In yesterday’s post, I reviewed the market data—including valuations, changes in margin debt, and changes in the market cap as a percentage of GDP—for some potential signals of a market crash. All seemed to provide valuable insight but were certainly not definitive. Part of the problem is that these signals can give false alarms or give correct signals that nonetheless result in only minor downturns. So, another set of filters is needed to help refine the analysis.

In my latest Market Thoughts video, I discuss recent declines in U.S. and international markets, spurred by a slowdown in growth and declining consumer confidence. I also provide an update on U.S. economic performance, highlighting an increase in consumer spending.