Stay on Target

I expect a rally here, but the bigger question of inflation versus deflation still looms in the background. A continuation of the bear market relies on continued inflation or a much less likely deflationary collapse scenario, the end game scenario where the Fed and government cannot stop falling prices.

I see the most likely path ahead as an inflation revival following a brief pivot by central banks, possibly with more stimulus. The Democrats would have to pass something before the November election, which gives them about three months because Congress goes on recess for the election in September. Another possibility is deflation now that the Fed doesn't stop. This would be a scenario where they hike 75 basis points in July and then do nothing until the September meeting, or slightly pivot but still hike 50 bps, and commodities markets crash into September and October. Then the Fed and Congress both stimulate and a larger rally unfolds into next year.

Russell Clark shares his thoughts on it here. He's looking for inflation, expecting stimulus in China: INFLATION OR DEFLATION? Muscle memory says deflation, politics says inflation

Whatever happens near term, the Second Half trade is still on.

Crude is at the center of bearish activity and that will also fuel any upside in stocks.