After some retrenchment last week in equity markets, the S&P 500 rose this week, breaching the 2,800 level that has been seen as a ceiling for the past 6 months on the index. For technical analysts, this indicates another move higher could be in store over the coming weeks, as momentum gathers. All this is prevailing against a backdrop of gloomy employment figures, ongoing uncertainty around Brexit and the China-US trade deal, and cracks emerging in global economic data. As a reminder, however, equity markets are just now returning to levels not seen since September of last year, putting the current run into perspective. With all the doom and gloom from the headlines, some are starting to wonder whether we are close to a near-term bottoming out on recent weaknesses, and whether the economy can find renewed strength with the Fed on hold. Some evidence of this has been spotted within US durable goods orders, Chinese growth data, international trade flows, and even US home sales.

Looking outside the US, Brexit faced several key votes this week, choosing to delay Brexit, in hopes of avoiding a split with the European Union with no deal in place. This ongoing saga has battered the British economy as investors flee over uncertainty for what the future holds. Ultimately, it is in no one’s interest for Britain to fall out of the Union without a deal, and likely a reasonable compromise will be made to avoid further pain ahead. Regardless of the terms of Brexit, it appears a second referendum is off the table as an option. Meanwhile, the US trade deal with China continues to be ironed out, with both sides postponing the planned meeting thought to occur this month to April at a minimum. After a year of fallout from the trade issues, China has finally caught a break, as domestic stimulus efforts take hold and local stock markets soar higher.

As we have said before, equity markets appear to be a bit overly optimistic as of late, given the myriad of potential crisis points still on the horizon. While we are generally positive on equities, the quick rebound and rapid rise from the December lows could be setting investors up for disappointment. A possible messy Brexit, Fed policy mistake, China trade blowup, oil supply shock, or North Korean missile could easily unwind the recent runup while stocks sit precariously near all-time highs. For those reasons, we will maintain our somewhat defensive posturing at this time until some breakthroughs are made on trade, economic data firms, or other geopolitical issues are put to rest. Sacrificing short term gains for longer-term perspective seems reasonable given current valuations at this time.