As the S&P 500 Index eclipses 2,800, stocks continue to grind higher, earnings continue to meet expectations to-date and the U.S. economy continues to chug along. I expect to see sustained upside for stocks with earnings that will most likely meet diminished expectations during the relatively quiet summer season.
On Tuesday, bonds will get a fresh assessment of the economy from the Federal Reserve (Fed) Chairman as he begins his semi-annual testimony to Congress. I will be watching for his commentary on the impact of trade conflicts, the flattening yield curve and inflation outlook. Any surprises in these three areas have the potential to disrupt the trend in rates. The path of least resistance for bonds is via a continued flattening of the yield curve, so I expect markets will continue in this direction for the next few weeks.
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