Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: This grade is a B+ (favorable).

THE FED AND ITS POLICIES: This factor is rated C- (Below average). In the minutes from the June Federal Open Market Committee meeting, the Federal Reserve members expressed their desire to begin shrinking its balance sheet before the end of the year, while the European Central Bank’s minutes contained discussions of ending its pledge to buy more bonds if the economy weakened. Rate hikes, meanwhile, are suddenly on the table in countries besides the U.S.

BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable). Earnings should be good: S&P 500 earnings are expected to grow by 8% during the second quarter, according to Thomson Reuters I/B/E/S.

OTHER CONCERNS:  The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 6 (an increase due to North Korea concerns). These risks deserve our ongoing attention.