We face an important economic calendar and earnings reports from 192 companies in the S&P 500. We will get important data on sentiment, personal income and spending, housing, employment claims, inflation, manufacturing. The first estimate of Q2 GDP is expected to be bad, very bad. And by the way, the FOMC meets and announces a rate decision on Wednesday.

The punditry will seek any hints about the state of the recovery as well as commentary about the COVID-19 impact. Earnings reports and the Fed press conference will be the basis for clues.

The difficulty with this search for evidence is confirmation bias. In a world where the data is suspect, unsupported opinion may sound profound.

In the days before the check engine light, a car owner might hear an odd noise and do their own checking, just like these boys working on a first car.

Investors are not compelled to take opinion at face value, of course. We can ask whether we hear a knock in the economic engine.

It is time to look under the hood.

This may not seem very exciting but give it a chance. I think you will be surprised at what you learn.

Last Week Recap

In my last installment of WTWA, I called attention to some hidden risk faced by investors – the concentration of a few stocks. This was indeed a popular topic in financial reporting last week, especially with some stumbles from the big five. It was an almost daily topic on CNBC and here is an example from print.

If the ‘Big Five’ Tech Stocks Falter, They’ll Take the Rest of the Stock Market Down With Them

And from Jesse Felder, who is always on the watch for problems, we have this chart and comment:

Just three stocks, Apple, Amazon and Microsoft, make up more than 16% of the S&P 500 Index and over a third of the Nasdaq 100 Index. Together they are now valued at nearly $5 trillion. That’s larger than the entire economy of Germany and roughly the size of the Japanese economy.