1) the Federal Reserve's announcement that it would likely begin tapering its bond buying program, and end it completely by mid-2014;
2) the rise of high expectations (Abenomics) in Japan, and the tempering of those expectations;
3) outflows of capital from emerging markets which have resulted in a severe currency crisis in several countries, notably India (and Greece, which is now considered an "emerging market"!)
4) a slow descent into chaos in the Middle East, thanks to Egypt and Syria;
5) some signs that economic growth was resuming in China after a summer of uncertainty and multi-year lows in the Chinese stock market;
6) Detroit filing for bankruptcy;
7) economic news that has been choppy at best, with early indications that second half growth will not be as strong as expected;
8) record earnings with no revenue growth.
If I would have given you this information on May 24th, the weekend of Memorial Day, how many of you would have guessed we would be flat? Not many. Most would have said down — particularly after a 15 percent gain.
So where does this play out for the rest of the year? For stocks, the consensus is limited upside. Most bulls think we can get perhaps another 5 percent gains on the year.
At 1,638 for the S&P 500, a 5 percent gain ends the year at 1,719. That is a mere 10 points above the historic high of 1,709 we hit on August 2nd.
Are stocks cheap? At roughly 15 times forward earnings, no. With rates rising, however, it will be difficult to have a multiple expansion.
The current estimate for 2013 earnings on the S&P 500 is $110. Multiply that by the current multiple of 15, and you get a price of 1,650 on the S&P 500— almost exactly where it is now.
The most important event next week is the August jobs report, out Friday.
Alec Young at S&P Capital IQ, made a good point on CNBC's "Squawk Box" this morning: the most optimistic position you can adopt right now on the report is a gain of roughly 180,000, slightly higher than expected. This is strong enough to be convinced that the jobs numbers are moving in the right direction, but not so strong that an aggressive tapering is coming from the Fed.