Risk appetite got a bit over-enthusiastic on Monday; and consolidated a bit Tuesday morning. We thought it was minor; more in the Dow than S&P; and called for recovery in the afternoon which occurred moderately.
 

To be clear, the widely spaced growth in parts of Europe and Japan did get a head-start on the U.S. That's why the Richmond Fed report reflected the ongoing US sluggishness. However to those who say that means policies are not helping; we demur. Aside regulatory relief the new tax and capital repatriation stimulus is not entering the time in which we expect results as intended by these moves.
 

Failure to get them oddly enough would help restrain interest rates; while if we do get them (and expect too); that creates headwinds for equity market enthusiasm especially later this year and probably next year. At least with respect to a full correction; rather than periodic shakeouts due sooner.   

Bottom line: the extended move creates more concerns going forward for the world's primary central banks. It's no secret that a meaningful move to tighten rates would destabilize everything; but that's hardly likely. While the Fed-heads will say they wouldn't want to be influenced by markets; reality is they are. That makes them afraid of bubbles; because they created and in a sense inflated the asset classes (equities and property) to this bubble.

Most are afraid to call this a bubble; but a reflection of growth improving. In reality it comes down to this: bonds will be liquidated to pay holders, and of course 'eventually' this becomes a cycle-ending phase; but in these times it becomes almost impossible for central banks to ramp rates aggressively, which is the irony as they know their monetary policies painted the corner they've painted themselves into.

My suspicion is, that despite protesting the lack of focus on markets; that's exactly what they intended 9 years ago; while kicking-their own balance sheet 'can' down the road by maintaining emergency low rates for so long. Now they are inherently reluctant to rapidly undue this. It's a slow process.

In sum: promised policy moves have delivered the essentials of growth, earnings and liquidity which pushed this market higher, with fairly frenetic activity. The primary pillars of the global bull market remain in place and in a sense are solid. However the extent to which they remain supportive of higher prices going forward is debatable given how much has been more or less 'discounted' by price movement. There is more comfort, rather than less, about this extended market.

Because that bullish sentiment is a classical sort of warning, although the growth expectations are higher than usual, and of course are now assisted by even the IMF remarks about the U.S. impact. This remains a seasonally firm time of year, but some (TD Ameritrade today is one) have warned that customer cash balances are the lowest in years; meaning already invested in markets now; and you had Bank of America / ML flip to the bullish side it seems, with a sudden call for S&P 3000. It may get there but one typically doesn't want to chase prices when the year-long bears are suddenly bulls; and the last funds are flowing to the market; which thus invites leverage as a mechanism to keep the momentum train from going off the rails.