Wolf on the prowl

Something’s off at Wall Street. The warning signs of a bear market keep piling up. But instead of sounding the alarm, investors are busy collecting good excuses.

Despite the current geopolitical tensions, the fear index (VIX) sits at its lowest point of the year. It’s a striking gap that markets don’t seem too bothered by: no time to be scared, Iran is just a small pebble in the shoe, but the hike to the summit must go on.

Second-quarter earnings for S&P 500 companies are expected to climb more than 31%, their fastest pace in five years. Markets love it. Yet the news coming from the economy is more mixed.

July retail sales fell 0.6% while the consensus called for a 0.1% gain, throwing cold water on the hopes of fully charged-up investors.

Sure, one weak number isn’t reason enough to change course. But the market’s reaction to the release says a lot: rather than worry, investors brushed it off far too quickly, blaming the shift in Amazon’s promotional calendar.

Then there’s the rise in US bond yields, now disconnected from expectations of Fed hikes. Something isn’t adding up, there’s a fish in the water, or to put it in more Scorsese terms, there’s a wolf on Wall Street.