As of Friday, we were in striking distance of a record high on the S&P 500 index. We have been here before, but something tells me that this time we just may break through. But for how long?

 

Granted, stock market volumes are exceptionally light, which is understandable, since we are heading in to one of the slowest weeks of the year. That makes any new highs suspect until volume improves. We would need to wait another week or so for that to occur. Next weekend is Labor Day and it is only after the holiday that the Big Boys get back into town.

 

What those players will do, once they are back in the cockpit, will determine the short-term direction of the market through September and into the end of October. There will not be a lot of upside catalysts to drive stocks higher during that period. But there are several issues that could pressure the downside.

 

Readers are already aware of the major risks: tariffs, higher interest rates, unpredictable tweets from the White House, etc. Some investors, as I mentioned last week, have already positioned themselves for an uptick in volatility by buying some of the more defensive sectors of the stock market.

 

We have also noticed that certain economic data points have failed to live up to the market's high expectations. That does not mean that growth has slowed. It just means that we may be reaching a bit too high right now for the numbers.

 

Even the Federal Reserve Bank's latest minutes reveal some concerns. Fed members are watching the developing tariff issue closely. Yet, they do not see any reason to stop hiking interest rates, but they are watching. Most central bank experts expect two more interest rate hikes this year (one next month and a second in December). Those expectations are already priced into the markets.

 

In an address to the annual Jackson Hole symposium of central bankers on Friday, Fed Chief Jerome Powell assured us that the economy is strong and that its performance will continue. Inflation is under control and he sees no signs of overheating.

 

Powell said that the Fed's gradual interest rate tightening policies will continue. He ignored the recent comments by the president, who has complained recently over the Fed's tightening policy, but Powell did say he was concerned by the government's burgeoning deficit,

 

the slow rate of wage gains, and the disappointing productivity among the nation's corporations. The Fed can do nothing about any of the above, however. Those are issues that Congress and the president must address.

 

Markets rightfully interpreted his comments as "dovish," at least on the margin. As such, readers should not expect a bear market anytime soon. At the worst, we could see more volatility over the next few weeks and months (both up and down). And while the earnings season is over for now (79 percent of companies "beat" profit estimates, while 72 percent beat revenues), analysts are already upping their forecast for profits and sales for next quarter.

 

As we head into the last days of the summer, I expect nothing negative to spoil your vacations. As for me, I want to advise readers that next week will be my last column until mid-September, when I return from a two-week vacation in Norway.

 

The S&P 500 index is within a hair's breadth of breaking out. This week we topped 2,850, which we haven't done since March. The record high for the index in January was 2,872.

 

Can we top that?

 

The S&P 500 Index traded within 0.5 percent of its record high this week. If we can close and hold a new high, it will be the 18th time the benchmark index has closed at a new all-time high after going six months without one. Statistically speaking, the odds of doing so are against us. Normally, if we use historical data, it should take the index another year before we reach a new high, but there is nothing normal about the environment we live in today.

 

Last week, I wrote that the market was locked in a trading range. The up and down action, I said, could continue through September and into October. At that point, I was expecting another move higher. I may have been too conservative, but the proof will be in what happens next.

 

We have been climbing for several consecutive days from a low of about 2,800 to the present level. NASDAQ and the FANG stocks have regained all their losses, while the overall market has risen on the back of positive second-quarter earnings results. What's more important is that overall guidance by corporations was bullish as well.

 

Technically, if markets are going to continue in this trading range, we should see a pullback soon. The key would be what level the bulls are willing to defend on the way down.

 

The 2,850 level on the S&P 500 would seem the obvious place to find some support. If not, well, chances are we go back to the recent trading range lows.

 

The absence of new news, now that earnings season is over, could also weigh on the bulls. And don't forget Washington. At any moment, a tweet from the White House could spoil investors' hopeful moods.

 

Have you noticed, however, that the tariff tantrums are affecting the market less and less?

 

For one thing, when you add up all the real or threatened tariffs, the impact on global growth is minuscule. Ken Fisher, an investment adviser I respect, wrote a piece for USA Today. In it, he argues that all the commentary, both pro, and con, on the tariff situation is wrong. He did the math, assuming the worst-case scenario happens. The global economy, which is worth some $80 billion a year, is estimated to grow by about $4 trillion in 2018. He calculates that if $161 billion in tariffs were levied on the world's consumers, it would only comprise a mere 4 percent of that $4 trillion in global economic growth. That's not much to get worked up about, now is it?

 

Patience is the keyword for 2018 when it comes to investing. Whether we break up or down in the short-term is immaterial. In the long run, let's say by the end of the year, stocks will finish the year higher.

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

This month would be a good time to go on vacation. Otherwise, you might be tempted to do something rash like chase stocks or sell at their lows. That is the kind of market volatility investors should expect in August.

 

The market's trading range is still intact and should continue and keep stock market values corralled into September and probably October. 

 

We had our moves up to the old highs (or slightly beyond) in most of the averages in July. A combination of anticipated stellar second-quarter earnings and somewhat less rhetoric from the "Trumpster," allowed equities to notch their fourth month of gains. Second quarter earnings have come in as expected for the most part, but much of that excitement is behind us. We still face the prospects of a trade war and all that might entail. The Fed is on hold until next month, but the bond vigilantes are expecting the central bank to raise rates again in September.

 

In the absence of any market-making good news, it would be a safe bet to expect stocks to drift lower by a couple of percentage points.

Since the real action won’t start until after Labor Day, any pullbacks or melt-ups will be trader-induced, on low volume and are as liable to reverse at odd or unpredictable times. This could last a few weeks until the algos and day traders exhaust themselves. By the end of the month, watching grass grow should be more exciting than watching the tape.

 

Since I am not a political analyst, you — reader — will have as much insight as I do on whether the GOP will maintain their majority in the House and/or Senate, or cede those positions to the Democrats. The question to ask is how the markets will react to the mid-term election outcomes.

 

If the GOP emerges victorious, I suspect stocks will rally. If the Democrats win, there may be a bit of disappointment, at first, but then markets will soon realize that a stalemate in Congress is a good thing for the markets.

 

In prior years, when Congress was divided, (think the Obama years), markets rallied because the logjam in Congress meant no new legislation. That equaled predictability and removed politics from the investment equation. Remember, investors like an atmosphere where

they can count on the status quo to continue. Granted, it may not be good for the country, but it is usually good for stocks.

 

The caveat must be Donald Trump. Nothing about the president is predictable. With a hung Congress, he may well resort to executive orders to advance his objectives. He may even reach across the aisle in some areas to forge a deal with the Democrats. I would expect a divided Congress would also increase the pressure on the president personally, as well as his cabinet, in the Russian investigation, personal finances, etc.

 

If the Republicans win, and Trump also increases his base support, it is anyone's guess on how the markets will react.

 

On one hand, Trump's Transformation of America would likely proceed with the ship moving at full-speed ahead. More tax cuts for the wealthy, the Wall will finally go up, immigration will slow to a trickle, business will enjoy even more benefits and the markets would

celebrate.

 

However, a full-blown trade would also become a real possibility. Higher tariffs would spark runaway inflation, interest rates would spike higher, the deficit would balloon, while tax revenues drop. Economists and Wall Street, alike, are convinced (although Main Street is not)

that the kind of tariffs Trump is threatening will not only hurt the U.S. economy but would most likely sink the global economy. A combination of all the above would be a "bridge too far" for the stock market, in my opinion.

 

In any case, preliminary polls (if they can be believed) indicate a tight race. Traders are already re-programming their voice-activated computer trading bots to sell or buy on the latest polls. The media, social and otherwise, will have a field day extrapolating every nuance and wrinkle of the race.

 

And, of course, we can count on a continuous stream of tweets cascading from the White House interrupted only by the delivery of yet another Big Mac with fries. Given that scenario, you better rest up now because this Fall could be a real humdinger.

 

It's the same old song. It has been playing over and over since the end of January. Higher interest rates, a stronger dollar, and, of course, the inevitable and meaningless stream of tweets from our Tweeter-in-Chief are keeping stocks range-bound. How long will this condition persist?

 

Both the Dow Jones Industrial Average and the S&P 500 Index have now posted their longest consolidation since 1984. The two indexes have been in correction territory for 113 trading days. That is a longer stretch than we have seen in decades — including the period of the 2008 Financial Crisis.

 

In 1984, it took the S&P 500 Index 122 days to emerge from the swamp, while the Dow required 123 days to do it. Only two of the last 20 corrections lasted for more than 100 trading sessions. The average correction length since the inception of the S&P 500 Index is 51 trading days. The absolute longest period was 229 trading days, which happened in 1978. So what?

 

The 2,810 level on the S&P 500 Index is providing strong resistance to the bulls, while the 2,700 level has been hard to break on the downside for the bears. The historical 12-month high for the index is 2,872.87. That's a mere 2.5 percent from here. So all-in-all, investors have nothing to complain about. We are up about 4 percent year-to-date — not bad, given the remarkable performance of last year.

 

Remember, we had little to no pullbacks in 2017. The average's 20 percent-plus gain was an almost straight-up phenomenon And that, my dear reader, was abnormal. A reasonable investor would expect to see at least half of that gain back, which occurred in February through March. Since then, we have been consolidating. 

 

This should not be a surprise to my regular readers. It has been my investment theme for months. I would say that stocks are doing well, given that we are in a rising interest rate/strong dollar environment. Despite these head-winds, corporate earnings are continuing to come through on the bottom, as well as the top line.

 

Yes, there is some worry and gnashing of teeth over what might happen if the trade war expands, but so far in this earnings season, few companies are actively cutting back on investment. They are just not increasing investment.

 

At the same time, corporate cash continues to be repatriated ($308 billion in the first quarter). While the argument by the president and the GOP that a return of this off-shore money would fuel capital spending was totally bogus, it did — as I predicted — manage to support the stock market. Almost $190 billion of that money has been used to buy back stocks so far.

 

Donald Trump's escapades — from his embarrassing and fumbling attempts at foreign policy, to his "unhappiness" with rising interest rates and the Federal Reserve — continues to amuse, bemuse, and in some corners, concern the 61 percent of Americans who are outside of his base. What he says or does might move the markets for a day or so.

 

Friday, for example, it was his threat to levy tariffs on all $500 billion worth of Chinese imports to the U.S. The Dow dropped almost 200 points, but by late morning, it had recouped those losses. It may be that Wall Street is simply tired of his posturing. In which case, I suspect he will just up the noise level until investors are forced to respond to his tantrums.

 

My short-term bet is that traders will try to push the averages higher, maybe back to the old highs, before failing once again. In a market where your fortunes are wholly dependent upon the next utterance from the White House, I can only guess. However, my longer-term view is that the tariff issues and the mid-term elections will keep the markets in check through September and into October. 

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

There was nothing to see in the markets this week, simply more of the same crisis news that may keep the media happy, but no one else. Tariffs and trade remain in the forefront and will continue to do so. What should investors do?

 

Just move on and enjoy your summer. The Fourth of July falls in the middle of the coming week with stock markets closing for half the day on Tuesday. As such, many professional traders will take the entire week off. Given that the Northeast faces their first summer heatwave as well, the corridors of Wall Street should be quite empty.

 

So whatever ups and downs the stock market may have next week will mean little to nothing. Those who must remain at their trading desks will be young, bored, and trying to make something "happen." Don't get sucked into it, because whatever will be done next week will probably be undone in the following week.

 

It should be abundantly clear by now that the continued antics coming out of Washington hold the key to short-term price movements in the markets. As a long-term investor, I have repeatedly advised you to ignore the small stuff and keep focused on the horizon, where things still appear bullish.

 

By now, you are probably aware that the administration floated a new trial balloon last weekend in their on-going trade war. They suggested that they might ban technology exports to China and other nations on the grounds of national security. That sent the U.S. markets crashing on Monday. By the end of the day, with the Dow down over 500 points, Trump sent out both Treasury Secretary Steve Mnuchin, and Director of Trade, Peter Navarro, to do some damage control. Both men immediately contradicted each other, but, in the confusion, they managed to pull the Dow off its lows.

 

Tuesday proved to be another wash-rinse-repeat day with Larry Kudlow, the president's economic adviser, chiming in with more negative and confusing comments on the trade and technology issue. The markets, which had rebounded off their lows, promptly gave up all their gains and sank further. In the end, the administration canned the whole idea. Instead, Trump asked Congress to strengthen the laws already governing foreign investments in areas that may pose a threat to the nation. 

 

In the meantime, Harley-Davidson, the American motorcycle icon, became the president's latest whipping boy. Readers may recall that this company was a specific target of the EU's retaliatory tariffs in response to Trump's tariffs on foreign-made steel and aluminum products. The European tariff (31 percent) was so effective that Harley announced it will move its production of European-bound cycles to Europe. The stock was down 7 percent on that announcement, as Trump lashed out at the company for "waving the white flag." Mid-Continental Nail, the largest manufacturer of nails in the U.S., also announced layoffs because of the steel tariffs.

 

Although the announcements came as a surprise to the president and his men, it shouldn't. Companies are not by nature political animals; they are economic entities required to answer to shareholders, not politicians. In the face of retaliatory tariffs by foreign countries, corporate managers need to worry about how that will impact their business. U.S. tariffs against imports will mean they can raise their prices here at home and make more money, but the opposite happens overseas in a tariff war.

 

To avoid the wave of retaliatory tariffs against American products, it makes total sense for businesses to shift production and jobs out of the U.S. and into the countries that have established these tariffs. Harley-Davidson is simply the first company to do so. Many more should follow if the trade war heats-up.

 

But all of that is still in the "what-if" stage of development. As I said, it keeps the media employed, but does precious little for you or me. Turn off the television, shut down the internet and ignore the newspaper headlines. Instead, go sit by the lake, pool, or ocean next week and work on your tan. Now that would be a productive use of your time!

 

Bill Schmick is registered as an investment adviser representative and portfolio manager with Berkshire Money Management (BMM), managing over $400 million for investors in the Berkshires.  Bill's forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.