I've been away visiting my father in Florida for a few days, but it's remarkable how much sentiment has changed. I look at the major "worries" and I see big progress, particularly on the two biggest problems for the market: the Fed and China trade.
1) Fed and rates: Chairman Jerome Powell provided much greater clarity on Fed policy, showing the Fed is listening and would be flexible.
2) China trade: Talks are beginning this week between the U.S. and China.
3) China economy: China is in stimulus mode. The Chinese government last week dramatically loosened liquidity and pledged additional support for small businesses.
4) U.S. inflation: It is tame, even with somewhat higher wages.
5) Gas prices: They are 20 percent lower since October, which I'm surprised I don't hear more about. It's a huge tax cut for the American consumer.
6) Recession risk in 2019: It is much lower, thanks to Powell's comments on flexibility and the still-strong jobs report.
7) Earnings: Much lower expectations already are built into the market. The only debate is whether you fall into the camp that sees zero growth in 2019 or the one that sees low-to-mid-single-digit growth.
8) Europe growth/Brexit: It is still murky, with no resolution here. That makes it tricky for European Central Bank's Mario Draghi. It's tough to cut rates if the economy slows when they are already effectively at zero.
9) U.S. political risk: It's still real, and not limited to the government shutdown that could keep things closed for some time. With ex-Defense Secretary James Mattis and other key moderates gone, markets are clearly worried that it may not be Powell that makes the "policy error"— it may be President Donald Trump.
Add it up: In the last week, six of the nine worries listed above have improved, with earnings now neutral. That leaves Europe growth/Brexit and U.S. political risk as the only two major worries that haven't improved since New Year's Day.
We are certainly not out of the woods, but the trend is definitely improving.