On Tuesday, the S&P/Case-Shiller home price index will be released. That afternoon brings the release of minutes from the August 9 FOMC meeting, during which three individuals dissented. ISM manufacturing comes out Thursday. Economists believe it will fall into contractionary territory below 50, based on recent disappointing regional manufacturing data. By Friday, the much anticipated nonfarm payroll figures for August will be released. Expectations are low, especially considering the difficult economic headwinds faced in the past month.

Equity markets faced mostly negative economic data last week for both the US and abroad, putting a quick end to the market rebound that began the previous week. In Europe, Germanys GDP slowed markedly. The regions most powerful economy expanded by just 0.1% in Q2, the slowest since early 2009 and down considerably from 1.3% in the first quarter. It was also far lower than an expected 0.5%. This in turn weighed on Eurozone growth, which expanded just 0.2%. Slower growth than the tepid levels already anticipated puts further pressure on the deficit-plagued region.

Last week, we learned the economy is continuing to struggle, but there was some slight improvement in jobless claims and retail sales. One area not improving is small business optimism. The National Federation of Independent Business reported that its Index of Small Business Optimism fell 0.9 points to 89.9 in July, representing the fifth consecutive monthly decline. Small businesses list poor sales, taxes and government regulation as their three most important problems. Consumers were also quick to echo that sentiment last week.

Volatility will be the word of the week as the US is now entering unprecedented territory after being downgraded for the first time. Postulating what happens next is complete conjecture at this point. Investors should prepare for heightened volatility for the near future. Several central banks will meet this week, including those in Indonesia, Norway and South Korea. In addition, the Federal Reserve meets on Tuesday with no expected change to its 0-0.25% fed funds rate stance. Markets will closely watch for any language about the pace of the recovery or clues about its balance sheet.

With fears of an impasse over the debt ceiling, equity markets faced a difficult week. Fortunately, leaders announced on Sunday evening that they reached a deal in principal to raise the debt ceiling. Many pundits have reiterated in recent weeks that a deal would be reached prior to the August 2 deadline, but markets and investors grew nervous over the past week. However, politicians stayed true to form. They assured the American people that, despite headlines from the past several months, Republicans and Democrats came together in the interest of their constituents to strike the best deal.

In a relatively light week of economic releases, market participants were pleased to see positive news beginning to build. Housing data in particular, excluding the existing home sales report, trended in the right direction. Housing starts unexpectedly jumped 14.6% to 629,000 in June. Strength was apparent across single- and multi-family housing units. Residential investment, an important component of GDP, will offer little support to second quarter GDP figures, but the upward momentum should put the economy on a better trajectory for the third quarter.

By early August, the US Treasury will run out of room under the debt ceiling and risks defaulting on its debt. There is growing concern, as evidenced by recent reports from Moody?s and Standard & Poor?s, that a deal will either not get done in time or will not suffice in fixing what is turning into a runaway fiscal freight train. Politicians are determined to play a quick and easy game of Russian roulette with the debt, not realizing that their attempts to undermine each other?s credibility in advance of next year?s elections are extremely dangerous.

An otherwise positive week ended in disappointing fashion but the equity markets held their gains. There were only a handful of market-moving economic reports last week, with the predominance of investors focused on the nonfarm labor report on Friday. Prior to that release, however, there was generally positive data announced on other sectors of the economy. Early in the week, the Institute for Supply Management announced that non-manufacturing activity expanded for the 19th consecutive month. Similar to the manufacturing sector, though, activity continues to expand at a weakening pace.

Economic data will rule the airwaves this week, especially the nonfarm payroll report on Friday. Economists are not overly confident that June was the month where employment growth finally kicked into high gear ? a sentiment which is supported by relatively weak initial claims reports over the last four weeks. Central bank meetings will garner considerable attention this week as well. The European Central Bank alluded to the possibility of another 25 basis point rate hike last week and there is a strong likelihood that emerging market economies will also tighten policy rates.

Personal income and consumer confidence will start the week with expectations of slightly higher numbers. On Tuesday, Case-Schiller data is expected to show moderate declines in home prices for April relative to March. The Treasury will follow its regular auction schedule this week with auctions of $35 billion worth of 2-yr notes, $35 billion of 5-yr notes and $29 billion of 7-yr notes. All eyes will be on Greece on Wednesday and Thursday, when Parliament will vote on the latest austerity plan. Greece noted that they will default if a new loan tranche is not available by mid month.

Equity markets endured six consecutive weeks of negative performance before eking out gains last week. The reprieve was welcomed but ultimately minor. Markets turned slightly more optimistic late last week on news regarding a new bailout package for Greece. Regardless of one?s opinion about the success potential of bailout packages, the uncertainty created by indecision has helped force markets lower in recent weeks. Economic data was decidedly mixed last week with some releases beating economists? expectations and others continuing to disappoint.

Bernanke gave a speech indicating that we might be facing a period of temporary weakness. He said, ?growth seems likely to pick up somewhat in the second half of the year.? Whether Bernanke ultimately turns out to be right is uncertain, but some indicators this week supported that notion. One depiction of that phenomenon is the Citigroup Economic Surprise Index, that measures the number of economic releases surprising to the upside or downside. After reaching a peak in March, the ESI plummeted, reaching a low on June 3rd. Since that point, the index gradually began to rebound.

At the start of the week, regional and national manufacturing reports showed a deceleration in the manufacturing growth rate. It was widely expected that manufacturing activity would slow after reaching a peak of 61.4 in February, but few economists realized the severity of the slowdown in May. The ISM PMI dropped from 60.4 in April to 53.5 in May. In the past decade, no other month-to-month decline was as large as the one in May. The second largest fall occurred just after September 11, 2001 (-5.4) However, at that time, the economy was already in the midst of a recession, not a recovery.

There was a limited amount of economic data released last week, and most of it turned out to be disappointing. The second revision to GDP showed the economy growing at an annual rate of 1.8% in the first quarter. Though the headline figure was unchanged, several important changes occurred in the data. Specifically, the Bureau of Economic Analysis stated that consumer demand actually rose at a 2.2% annual pace in the quarter, down from the 2.7% annual rate reported. Overall, GDP was weaker than feared in the first quarter as higher inventories and not consumer spending drove expansion.

Another volatile week resulted in the S&P 500 Index losing 0.3% and the Dow Jones Industrial Average falling 0.7%. Economic data last week continued to confirm that housing markets are sluggish and that manufacturing is entering a weak patch. Existing home sales unexpectedly fell in April. Economists expected sales of existing homes to reach 5.2 million in the month, but the actual tally for April was 5.05 million, down 0.8% from the previous month.

Investors turned away from the equity markets last week, as the S&P 500 Index fell 0.2% and the Dow Jones Industrial Average shed 0.3%. Stocks started the week in positive fashion, but an uptick in risk aversion on Wednesday weighed on markets. Market participants were caught off guard by unfavorable inflation statistics from China, a tightening of monetary policy in China and recent strength in the US dollar. At the beginning of May, the US dollar was nearing oversold territory and traders would likely capture profits in the weeks ahead. That is exactly what occurred.

A volatile week of trading resulted in the S&P 500 Index losing 1.7% and the Dow Jones Industrial Average falling 1.3%. However, those losses were tame relative to the rout experienced in commodity markets. According to the Wall Street Journal, crude oil dropped 14.7% last week, while the Dow Jones-UBS Commodity Index lost 9.1%. There was no single cause for the sudden risk aversion, but it appears that recognition of a slowing US economy, along with tighter monetary policy in developing economies, contributed to the renewed caution.

Another week of encouraging corporate earnings reports allowed the equity market to continue its recent strong run. On the housing front, the disappointing streak continued. New home sales increased from a seasonally adjusted annual rate of 270,000 in February to 300,000 in March, according to the Department of Commerce. Although the gain was sizeable at 11.1%, new home sales are mired at abjectly low levels. Homebuyers are finding favorable opportunities in the form of distressed properties, reducing the chance of a significant rebound in new home sales in the months ahead.

News of a potential downgrade to the US credit rating caused a sudden sell off in the equity markets, but positive earnings reports led to a rebound. By the end of the week, the S&P 500 index and the Dow Jones Industrial Average both closed higher by 1.3%. S&P took the unusual step of placing the US on credit watch negative, indicating that there is now a 1-in-3 chance of an outright downgrade to the US credit rating in the next two years. The announcement by S&P resulted in a severe equity market sell off on Monday morning before investors remembered S&P?s previous track record.

Earnings season brought about a week of choppy trading in the equity market, resulting in the S&P 500 index falling 0.6% and the Dow Jones Industrial Average dropping 0.3%. Economic data throughout the week was mixed, but the impact of higher gas prices is being felt across the economy. Small businesses recorded a severe hit to sentiment last month after the small business optimism index sank from 94.5 to 91.9. A host of concerns, from declining sales expectations to trepidation about the future of the economy, were culprits behind the weakening.

Over the past six months, actions by the Federal Reserve to purchase assets through its quantitative easing program played a major role in driving market prices. As the markets prepare to transition away from quantitative easing, investors are facing the prospects of a tougher market environment. The upcoming earnings season will go a long way in determining whether this recovery is ready to stand on its own.

Equity markets surged into quarter end, with the S&P 500 index rising 1.4% and the Dow Jones increasing 1.3%. For the first time since Feb the S&P 500 increased in two weeks. After hitting a trough on Tuesday morning, several positive employment reports encouraged the equity markets to move higher. As expected, manufacturing activity had a deceleration, as the ISM Purchasing Managers Index fell from 61.4% in February to 61.2% in March. Readings above 50% are representative of expansion in the manufacturing sector. Although the index fell, it is still the third highest reading since 1990.

Equity markets donned the rally cap last week as the S&P 500 index finished higher by 2.7% and the Dow Jones Industrial Average experienced a 3.1% gain. Stability in the price of crude oil and improvement in Japan lent a helping hand to the markets, as did the announcement that AT&T would buy T-Mobile. On the domestic front, investors turned a blind eye to the slew of negative economic data. Housing, in particular, experienced the brunt of the disappointment. Existing home sales offered the first piece of bad news after falling 9.6% to 4.88mln on a seasonally-adjusted annual rate in February.

Stock markets struggled in recent weeks due to a host of macroeconomic concerns, from earthquakes in Japan to uprising in the Middle East. This is causing a move in the markets that is similar, but different to what is typical during the third year of a Presidential cycle. Generally, markets rally in the first portion of the year before trading essentially flat in the second half. In the first two months, markets were adhering to this same pattern, but the aforementioned macro concerns derailed that rally. This does not mean markets will be unable to stage a recovery.

A confluence of macroeconomic events created selling pressure during the week, sending the S&P 500 Index lower by 1.3% and the Dow Jones Industrial Average down 1%. Releases on the domestic economic situation continued to show positive momentum, ranging from improvement in retail sales to a pickup in consumer credit. There was some concern about weaker consumer confidence figures and deterioration in weekly jobless claims, but it was clear last week that consumer balance sheet deleveraging continues. Retail sales for Feb increased 1% from Jan for a total increase of 8.9% in 12 months.

There is a dangerous trend developing in food and energy costs, one that threatens to derail the global recovery. Thus far, consumers are able and willing to accept higher commodity prices. With consumers still feeling the effects of the worst recession in nearly a century, though, there is only so much that people will be willing to tolerate and the second half of the year may be too far away, at least when it comes to crude prices.

Global macroecon concerns led to the sharpest weekly sell off in the S&P500 Index in three months. For the week, the S&P 500 Index was down 1.7% and the Dow Jones Industrial Average fell 2.1%. A multitude of catalysts were behind the selloff, including concerns about the situation in Africa and the Middle East, surging commodity prices, in particular crude oil, and finally, a feeling that equity valuations were moving into overbought territory. There were only a handful of important domestic economic releases last week, including several data points on housing and the state of the consumer.

In a sadly fitting tribute to the fiscal mismanagement occurring in Washington, D.C. these days, the National Christmas Tree, which stood in the same spot since 1978, was felled by high winds Saturday morning. Not to fear, park authorities had a contingency plan in place and a new tree is on the way. Unfortunately, politicians are not known for the same degree of contingency planning and last week?s budget proposals proved that we are in for a torrent of trouble.

Equity markets continue to melt higher, despite several unfavorable technical developments. The market began its recent rally in September of last year, with only a brief respite in November. Since that time, each pull back is used as an opportunity to pile more money into equities and with the Federal Reserve offering massive liquidity to all corners of the market, this phenomenon could potentially last longer than any are willing to admit.

Encouraging. Confusing. Disappointing. Mixed Bag. These were all terms used to describe the labor report for January. Ultimately, it may turn out that none of those terms are relevant and investors would be better served in pretending this report was a figment of our imaginations.

Last week, Standard & Poor?s made the decision to cut Japan?s credit rating from AA to AA-. The timing of the decision was unusual as there was no sudden event in Japan that triggered the downgrade, but S&P cited mounting debt concerns and the lack of coherent strategy by the Democratic Party of Japan as major reasons for the concern. Japan was initially downgraded from AAA status in 2001, when debt to GDP stood at 135%. With the US well on its way to that same figure, is now the time to ring the alarm bell?

Important economic data recently released concerns housing, which has provided both signs of encouragement and weakness in the past month. Existing home sales jumped 12.3% in December, to a seasonally-adjusted annual rate of 5.28mln. An uptick in mortgage rates, from a recent low of 4.17% in November, to 4.86% more recently appears to be encouraging buyers to enter the market before it is too late. Due to the strong showing in December, overall housing inventory fell quite considerably in the month, reaching its lowest point since March.

Equity markets trended higher for the seventh consecutive week, raising concerns about the potential for a long overdue correction.The S&P 500 Index was up 1.7% and the Dow Jones Industrial Average rose 1.0%. Economic data proved to be somewhat mixed, but largely supportive of the move higher in equity prices.Retail sales, for instance, which reached an all-time high in December, increased 0.6% in the month, slightly below economists? expectations for a 0.8% gain.

Last year will unequivocally be remembered as the year the sovereign credit crisis unfolded in earnest. We were fortunate that no major sovereign defaults occurred during that period, but can we hope to be so lucky in 2011?

With 2010 officially behind us, it is time to consider what risks and opportunities lay ahead for investors for 2011. Just as 2010 proved to be the year of the sovereign credit crisis, 2011 will not be forgotten as a year without its own potholes. From the economic side of the ledger, the biggest concern remains employment. Despite improving economic growth and a Federal Reserve that has shown a penchant for doing everything in its power to stimulate the economy, employment growth is virtually nonexistent since the recovery began.

For as much attention as inflation garners, it still appears to be a far off concern, for consumers at the least. Consumers should also understand that when the time for price increases does materialize, producers will be sure to make up for lost time and lost profits by funneling those increases through in rapid fashion.

According to EPFR Global, a research provider that aggregates mutual fund flows, the week ending December 8th saw investors allocate $13.7bln of new capital to stocks funds while only investing $146mln in fixed income funds. Domestic bond funds experienced withdrawals of more than $1bln. Interestingly, money market funds picked up more than $32bln in new funds, the highest total in 22 weeks. Whether this is a wise time to jump back into equity securities remains a hotly debated issue but based on several metrics, this may not be the most opportune time to increase equity exposure.

Earlier in the fall, pessimists were pointing towards a slowing ISM index as a surefire harbinger that a ?double-dip? recession was on the way. That did not happen, fortunately, and manufacturing activity has since rebounded. Several subcomponents also provided encouraging data. In particular, the employment index finished the month at 57.5, a clear-cut sign that manufacturers are continuing to hire in order to keep up with growing demand. Somewhat less positive was the prices paid index, which remained elevated at 69.5 in November.

Early indications from the weekend shopping spree suggest that it was an overall success for retailers. Perhaps even more encouraging was the news that consumers would be less reliant on credit cards for purchases this holiday season.

Now that Ireland?s domino is falling, what next? It turns out that the vultures are circling back to get another piece of Greece. Officials restated Greece?s budget deficit for 2009 to a whopping 15.9% of GDP. Couple that with recent rumors that Greece was hoping for a payment extension on its $150bln bailout and you have a recipe for further disaster. Not to be forgotten is Portugal, a country with a budget deficit of 9.3% of GDP in 2009. It may be a period of months before Portugal is forced to pay the piper, but make no mistake, eventually Portugal will face its day of reckoning.

Economic data provided a degree of cautiously optimistic news, although it was a subdued week compared to the exhaustive news faced in prior weeks. There will be plenty of important economic data to key in on this week. October retail sales will be released on Monday and economists are expecting a relatively healthy gain for the month. Inflation will return to the forefront with the release of the Producer Price Index on Tuesday and the Consumer Price Index on Wednesday.

There is no doubt that the events which transpired last week are without precedent. The long-term implications of quantitative easing by the Federal Reserve are entirely unknown. Should the Fed?s program conclude on schedule, private investors would need to step to the plate and replace the incremental demand lost from the Fed. It is unlikely private investors could replace that demand, which would lead to enormous upward pressure on interest rates.

Investors are wondering whether the recent market rally is built on a solid foundation or merely another in a long line of illusionary rallies should heed a bit of caution. Investors are largely bidding risk assets higher on the belief that the Federal Reserve will inject significant amounts of liquidity into the economy through a second round of asset purchases. This is an extremely dangerous and poor investment thesis.

Some prominent European leaders have touted the view that fiscal austerity actually supports short-term economic growth. The root of this thinking is a study by Harvard economists Alberto Alesina and Silvia Ardagna. A recent IMF report, however, questions the credibility of that study. The IMF concluded that austerity 'clearly' inhibits growth in the short term, while a fiscal consolidation equivalent to 1 percent of GDP leads on average to a 0.5 percent decline in GDP after two years, and to an increase of 0.3 percent in the unemployment rate.

Inflation is arguably not an issue for the time being, but with the Fed prepared to unleash trillions in additional liquidity, the outlook for inflation is more uncertain than ever. While yields on government bonds with a maturity between 2- and 10-years are flattening, the long end of the yield curve is widening dramatically. Long-term bonds exhibit the most sensitivity to interest rates and inflation, so this may be the first indication that inflation will pose a serious threat down the road. Investors and consumers alike should tread very, very carefully.

The National Retail Federation announced last week that it expects holiday sales to increase by 2.3 percent from last year. That is good news following a decline of 3.9 percent in 2008 and a meager 0.4 percent growth rate in 2009. In addition, consultant Challenger, Gray & Christmas estimates that the retail sector will add as many as 600,000 jobs over the next three months. That is better than the 501,000 jobs added during the holidays last year, but still well below the pre-crisis levels of more than 700,000.

Suggesting that the bond markets are in a bubble is dangerous at this point in the economic cycle. The intervention of the Federal Reserve into the government bond markets will inherently depress yields, while a lack of clarity around economic growth will encourage individuals and corporations to refrain from embracing excessive spending. This in turn could lead to stagnant growth and further desire to hold less risky assets. For now, bond investors can sleep well knowing that sometimes, just sometimes, you can have your cake and eat it too.

The determination by the U.S. government to revalue China's renminbi is another smoke and mirrors tactic to divert our attention from the true crux of the problem, a faltering economy with little hope for regaining stable ground for at least the next several years. Even if China appreciates its currency, there is no guarantee that it will provide a boost to the American economy. Jobs that were long ago outsourced to China will simply move to the next-cheapest home; they will not return to the U.S.

Is the global economic recovery about to grind to a halt? This column provides evidence on economic performance in the decades following macroeconomic crises. It finds much slower growth, as well as several episodes of 'double-dips,' as well as many instances of plain 'bad luck' that strike at a time when the economy remains highly vulnerable.

A recent paper from the Organization for Economic Cooperation and Development found that the European bank stress tests were less than stressful. This was because they only considered sovereign debt held on banks' trading books, not on banking books. The trading book of Greek banks, for example, only represents 6.7 percent of the overall Greek sovereign debt exposure on their books. The ignored banking book exposure represents the other 93.3 percent. On a cumulative basis, that translates into a sovereign exposure to Tier 1 capital ratio of more than 225 percent.