SPXE

The Dow Jones Industrial Average lost 0.3%. The S&P 500 fell 0.64% while the NASDAQ Composite fell 1.16%.Central banks have taken extraordinary measures to provide liquidity to the markets over the past six months.The technology sector will continue to benefit from the growing trends in internet retail, education, entertainment, medicine and work.

Three new forces are set to lift inflation beyond what markets are currently expecting in the years ahead, reversing a decade of subdued price rises.Market volatility has returned after months of steady advances in risk assets, and could stay elevated as the U.S. election draws near.Markets will focus on a slew of purchasing managers’ index data this week to gauge the latest business sentiment.

This is a weekly series focused on analyzing the previous week’s economic data releases.The objective is to concentrate on leading indicators of economic activity to determine whether the economy is strengthening or weakening, and the rate of inflation is increasing or decreasing.This week I’ll examine industrial production, retail sales, initial jobless claims, and consumer sentiment.

The decisive rebound in the EPS revision cycle from the pandemic lows in June has provided much of the firepower behind this summer's risk rally.The downtrend in 2020 EPS forecasts appears to have bottomed, while 2021 numbers have swung higher.With hopes for a robust EPS recovery next year still riding high, any further deterioration or a negative turn in the revision cycle could create headwinds for markets.

There was a huge inflow into the SPY last week while money left the QQQ.The Chicago Fed's National Activity Index shows an expansion in August.The bears come out of the woods to start the week.

Expect more down days and volatility in the stock market.We have no control over downside, however, we have complete control over how we react.If the long-term stories of the stocks you own remain intact, we're at the beginning of what might one of the biggest buying opportunities we've seen in a while.Many investors panicked in mid-March. Be patient, but be ready to buy. Don't make the same mistake twice.

The S&P 500 is breaking key level of technical support.Typically, when the market's technicals break, we turn to fundamentals.The problem - stocks need to fall as much as 15% more to find fair value.

The Fed recently revised its monetary policy strategy, replacing 2% price inflation targeting, adopted in 2012, with a new approach in which the Fed targets an average inflation rate instead.The reaction to the new policy was mixed. We see adverse comments as misguided and not attuned to recent economic developments in the US and around the world.It's been decades since we saw inflation stay above 2% for long. To assume that the “punch bowl” would be taken away soon on an overheating (economic) party is laughable.The fear of traditionalists is that if inflation trends upward, delaying palliative measure for so long would risk inflation expectations unmoored and sets off an uncontrollable inflationary spiral. This argument appeals to what happened in the 1970s.The Fed, to put it mildly, is desperate to see some sustained inflation, doing whatever it does in an economic system. We therefore expect steepening yield curves, higher interest rates and bond yields in the intermediate future as consequence of this new Fed policy.