The late stages of any economic cycle provide fertile ground for divergent opinions. Some recent positive numbers, for example, can be viewed as reflective of underlying strength but they can also be viewed as an indication of overheating and ultimately higher inflation.

What is unique to this cycle is that it is also accompanied by massively divergent beliefs regarding what the end game looks like. While some investors harbor doubts about whether markets can keep going up, others harbor doubts about whether many existing financial, economic, and political institutions serve a useful purpose. As a result, one must answer a seemingly stupid question in order to evaluate investment strategy: What does it even mean to invest?

To be sure, markets delivered good news in the quarter. Major indexes recovered their mojo under the power of good economic strength, strong sentiment and low unemployment. Sentiment, especially for small caps, hit record highs which served as an expression of joy and relief about trends in taxes and regulation, among other things. Such good news was tempered, however, by Fed tightening and geopolitical concerns. Warning signals were especially flashing in emerging markets.

Indeed, there are plenty of signs that market activity is getting stretched. For example, the Financial Timesquoted distressed debt investor Jason Mudrick [here] arguing that "the roaring economy" is "just not sustainable" He went on to say, "My job is not to predict exactly when [the turn in the cycle] happens but to have the platform ready when it does." As a result, he is planning ahead by marketing a second distressed debt fund to take advantage of the fallout when the market turns.

Respected strategist David Rosenberg provided a very blunt assessment [here]: “Cycles die, and you know how they die? ... Because the Fed puts a bullet in its forehead.” He went on to quantify the risk: "We are seeing a significant shift in the markets. The Fed was responsible for 1,000 rally points this cycle so we have to pay attention to what happens when the movie runs backwards."