The summer is winding down. Corporate-earnings season is just about through. Federal Reserve policymakers have thoroughly aired their thinking at the annual Fed research conference last week.
And after seven months of retrenchment, repair and recovery, the broad stock indexes have notched a hard-won breakout to a record high.
In other words, the markets have reached a "now what?" moment, on the cusp of a consequential midterm election and an approaching climax of a global-trade reordering.
Looking strictly at the market's behavior, the setup is fairly encouraging. A breakout to a new high by definition means the bull market remains intact and, by extension, no past buyer of stocks at the index level feels anything but smart for having played the game.
Over the past 90 years, when the S&P 500 makes its first 52-week high in six months or more — as it did on Friday — the index has been higher over the ensuing year 94 percent of the time, according to Jonathan Krinsky, chief market technician at Bay Crest Partners.
And in prior years when the S&P was up between 5 percent and 10 percent midway through August, the returns for the remainder of the year have typically been positive, with gains better than the average of all years.
Traders might also be feeling the muscle memory of 2017, when the S&P 500 was up a good but unspectacular 8.3 percent into the third week of August before accelerating to surge another 15 percent over the next five months — culminating in the peak at 2,782 on Jan. 26.
The market doesn't always make it so easy as to play the same late-year melt-up script two straight years, but one can't ignore the chance that something similar could unfold.
Yet the very good news reflected in stock prices a year ago could be difficult to top — and perhaps explains why the market has been, and could remain, relatively hard to please. The big corporate tax cut was rounding into shape just as Europe and Asia economic data started to pick up and oil prices began to ramp, creating a rare array of positive forces that led to an unheard-of surge in S&P 500 earnings growth nine years into an economic expansion.
The sheer brute force of the good news that it's taken to squeeze the S&P 500 to its 8.3 percent gain this year — that 20 percent profit eruption, a Fed stressing patience, tame Treasury yields, pliant credit markets and a $1.5 trillion pace of combined cash dividends and stock buybacks handed to shareholders of S&P 500 companies — is notable.
Bullish observers will likely point to the overhang of the president's decision to wage "trade wars of choice" to explain why stock prices have lagged earnings growth so dramatically. Perhaps.