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Hang on to your party hat—S&P 2,000 isn't the top

Thud! The silence was deafening. Friday's Jackson Hole speeches by both Fed Chair Janet Yellen and ECB Chief Mario Draghi were a big "nothing done."

Yellen didn't utter a single word that could possibly give anyone the interpretation that rates are moving up any time prior to current expectations — June-ish 2015.



Adam Jeffery | CNBC

Why do slightly higher rates cause increasing anxiety? Is it because investors/traders don't believe that the recovery is real? Is it that they don't believe that the economy can withstand higher rates? Is it only because the Fed has forced this trade?

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This, my friends, is the real quandary: It has been 7 years since the onset of the great financial crisis, a crisis only eclipsed by the Great Depression of 1929, which lasted for 9 years (with its own fits and starts).

The U.S. has embarked on a campaign of stimulus that is unprecedented — there is no road map available for the trip we are on. And as much as we are told that it is getting better, there are a great number of Americans (and Europeans and Asians) who would debate that point.

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Though we have all of these central bankers — bankers with Ivy League MBAs and PhDs — many can't see the forest through the trees; no one really knows what the final destination looks like – they can only try to manage the journey. From an investment viewpoint, what makes a savvy investor is someone who CAN see the forest through the trees and doesn't overreact to the noise.

The S&P 500 finally pierced 2,000 on Monday, a level we've been trying to pierce for the past three weeks. After Friday's speeches, the path of least resistance continues to be up — and that will be the case as long as the central banks remain accommodative.

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That being said, the present state of accommodation in this country is slowing, so I think that this year will be a return to normalcy. I think we'll get an 8 percent to 12 percent return by year end. We're already at 8 percent, so a 10-percent return would take us to 2,030-ish — that is what I expect year end to look like. Barring any significant uptick in geopolitical tensions, I think we'll remain in a trading range of 1,950 to 2,050.

We will get some important macro data points this week: durable goods, the second revision to second-quarter GDP, capital goods, S&P/Case-Shiller and the Richmond Fed Survey. But remember, volumes are low, so moves can be exaggerated — the real tone and sense of the latest move will be re-visited in early September.

Commentary by Kenny Polcari, director of NYSE floor operations at O'Neil Securities. He is also a CNBC contributor, often appearing on "Power Lunch." Follow Kenny on Twitter @kennypolcari and visit him at kennypolcari.com.

Disclosure: The market commentary is the opinion of the author and is based on decades of industry and market experience; however no guarantee is made or implied with respect to these opinions. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of O'Neil Securities or its affiliates.