Indeed, we got a standstill on the trade war.  And with that, we had a big gap UP on the opening for stocks on the week.  That puts us up around 5% on the year.  And I suspect we’ll continue to see stocks on the climb — moving back to the highs of the year, and possibly much higher.We have plenty of fuel for stocks.

From a valuation standpoint:  As of Friday’s close we had a stock market trading under 16 times earnings, on a 3% ten-year yield.  That’s very cheap for a low rate environment.  Expect that P/E multiple to expand.  As volume lightens up into the holidays, it’s not unusual to see markets make signficant moves on end-of-year light volume.

From a fundamentals standpoint:  Remember, last week we discussed the Goldilocks scenario created by the fall in oil prices.  The sharp adjustment in oil prices has taken the pressure off of the Fed, allowing them to signal a pause on their rate normalization program (i.e. rate hikes).  If they were worried about inflation accelerating above their favored 2% level, a 35% slide in oil has a way of calming those fears.  And today we get some data to support it.

The manufacturing data this morning showed a big downside surprise in the inflation data  — the lowest reading since June of last year.

Meanwhile, the manufacturing activity came in higher than was expected.  That means activity is hotter, while prices are tame.

So, as stocks have been in correction, the narrative from the media and Wall Street has been “slowdown” and “inflation pressures” (trying to fit a story to the price, as they usually do).  Meanwhile, the data today shows manufacturing activity running at the 12-month moving average, and with price data running well below the 12-month moving average.  Friendly reminder:  Things are good!