If you felt a small tinge of anxiety when you woke today, we get it. It’s August 1st, which unfortunately means  we’re in the last 1/3 of summer. Given the oppressive heat waves spanning the globe, perhaps that’s not the worst thing. Equities equally hot last month, and so the trepidation could be due to concern this was nothing more than a bear market rally, with stocks surely headed for a measure of mean reversion. Regional Fed President Kashkari attempted to throw a bit of cold water on the hot streak but the day’s meandering had more to do with a directionless summer day than sentiment cooling off. It’s been quite the opposite of late, setting up an ugly scenario were inflation data were to fly in the face of the recent narrative. That being the Fed ready to make a clear pivot. The data we got this morning was net positive even if there were a series of hits and misses. Employment was stronger than expected as was manufacturing but new orders slipped. That said, attention was squarely on ISM prices paid, which took a significant dip lower and further solidified the hope the CPI/PCE figures to come in the next two weeks will stay on message.

When multiple clients tell you this morning they thought it was Friday, you know it’s been a week! Talk about a rude awakening for those with their calendars mixed up. But they can be forgiven for such a mishap, the flurry of activity melding the week’s days into one and we’re not even finished. On the bright side, we’re not in a recession at least. I’m sorry, what now? But Jerome said…in the traditional sense, the -0.9% fits the definition but Powell rejected that notion yesterday. That’s that then. But you could make the argument he’s right, with a number of bellwether companies suggesting in fact we aren’t in the throes of a classic recession. Although don’t tell that to Treasuries, all points along the curve sinking but the early bit more than the back end. Reconciling what’s happening in the bond market (and you know, GDP!) with the fact corporate earnings have remained steadfast has presented another conundrum for equity investors. Now about halfway through the reporting period and profit beats have come in at a historically familiar level i.e. been pretty good.

The weather has been pretty delightful here on the east coast, but as one leaves work to grab lunch and feels as if their walking into a bowl of soup, it’s safe to say the dog days of summer have officially arrived. The UK apparently having more problems than most… Yes it’s hot outside – summer’s gonna summer. But the office provides a decent alternative if you’re unable to cool down at the beach and a traditionally slow time of year for markets has earnings season to maintain interest.

As the 150th British Open kicks off at St. Andrews today, it brought back memories of the good fortune my friends and I had a few years back when we secured a tee time at the Old Course. You don’t know nerves on a golf course until you’ve teed off in front of a massive crowed, even at 6:30am, while sporting a double-digit handicap. Maybe that first drive went OB but our cigarette-rolling/drinking whiskey out of a flask caddie soon calmed our collective nerves.

Inflationàcorporate balance sheets à the Fed. All intertwined and all coming soon to shed light on a market that’s been on unsteady legs once again. Caution was the name of the game, nobody was feeling too brave ahead of CPI tomorrow morning, especially if one had done so last month. The S&P traded lower into the print back in June and a hotter than expected figure resulted another aggressive sell-off, so no reason to be a hero today. Especially considering the number is expected to be higher than last month, with a 9 handle being whispered. And even THAT may not be the end of it, potentially making a mockery of the phrase “peak inflation.”

Well there was no easing into the week after the holiday so hopefully whatever BBQ and subsequent meats and drinks you indulged in didn’t have you too sluggish because there was no rest for the weary. The mood remains an unsure one, with a recap from our inimitable Charts guru post his 2-week roadshow in the US suggesting many investors feel the recession is already here.  It’s no longer a question of if but ‘how deep’ and for ‘how long?’ That does remain to be seen but surprisingly, even with the gloomy sentiment, something is amiss in the market these days. The Treasury bond volatility measure hit a 12m high last week, the FX Vol index did the same a few weeks ago; yet we’re not seeing nearly the same from the equity side of things. That recessionary mindset seemed to be at play early on, with equities sinking across the board. But the S&P recouped more than 2.5% from early lows to finish just barely in the green. The Nasdaq had the same chart and a much higher base, finishing far ahead on the day while energy was another story altogether.

Last night I went to see the Broadway play Wicked, and it’s well worth a visit if you haven’t seen it yet. Great songs and of course the added nostalgic benefit of the beloved Wizard of Oz were sprinkled about. Most interesting was it’s completely different perspective on the story we thought we knew. Wall Street could use a bit of different perspective right now, with the last few investment banks piling on to an already pessimistic market this morning. (Talking their own book perhaps?) The AAII Bull Bear survey had the 2nd highest % of bears in 10 years and talk of a recession has a tone of when not if. And the PMI numbers we got earlier today, missing estimates and creeping ever closer to contraction territory, did little to dissuade from that notion. But such one-sidedness can lend itself towards outsized moves in the other direction and while this week has barely dented what’s happened year to date, it could at least be viewed as encouraging. Are we building a bit of a base, or being lulled into a false sense of security though? We have seen a bit of sideways pricing action the last week-plus and the S&P 1500 having a 50/50 split on the gainers vs losers further highlights investors indecision/hesitance. We are watching 3810/15 on the S&P, above that could trigger a rally to 4087 but trends remain down and while the benchmark did peek above 3800 today, it fell short of closing there.

There’s really no nice way to say it – it was a week to forget but one we’ll likely long remember. Don’t let today’s quixotic move higher fool you; it was meager compared to the losses we saw the previous 4 days and volumes did little to suggest there was any genuine meaning behind it. The strings pulled by central banks have forever been calculated and deliberate ones so the actions seen this week rightly left markets shaken. The US benchmark saw the most modest of lifts while tech/growth far outpaced the field but a bit of covering into the long weekend after the last week plus’s drubbing likely the cause. There wasn’t much in the way of optimism from economic data (factory demand cooled, ind production missed) we saw this morning, with the conference board survey revealing more than 60% of CEOs believe a recession is on the way in 12-18 months’ time. Yields across the curve rose after Powell added to the Fed-speak lexicon with an “acute focus” on reigning in inflation; we’ll get more from him next week.

If you were hoping the summer would offer some rest for the weary volatility-wise, you can likely think again. This past Thursday felt like we could be on the verge of a new bull market, while Friday’s slide moved the recent move higher into ‘bear market rally’ territory and today? It seemed like a bit of both.

Perhaps this is more than simply a bear market bounce. With the Queen’s 4-day rager kicking off today, it seemed like an opportune time for markets to rest on their laurels some a few days into the summer and ahead of key economic data. But today has seen the opposite. And while we didn’t see the levels of volumes we’d prefer to signal something substantial, it’s hard to deny sentiment at least is starting to match some of the positive signs emanating from the market. It’s not often a top 5 biggest company in the world cuts guidance as one of the more dovish members of the Fed spreads their hawkish wings and yet we finish firmly in the green, but here we are.