Welcome to Fed week.  Assuming it does hold rates steady, the outlook given on Wednesday afternoon and Powell's press conference is likely to be the only economic data that will matter this week.  However, as promised, I wanted to take a step back to comment on how the big picture has evolved for the market.  I was not alone in thinking the committee would cut rates by this point, but not many others have been as strident in saying that would have been a mistake.  This has managed to hold the market and the economy together so far, but I reiterate that something's gotta give, probably after D.C. figures out its budget.  Thus, I'm providing an updated chart from the Fed's 1Q25 Z1 release on Friday.  The drop in equities was a given, but the S&P 500 index, is set to trade back near all-time highs today as Israel claims it gained air superiority over Iran this weekend.  The P/E ratio of the index, which is market cap weighted, is higher than the 20-year average by more than half.  However, I've seen estimates putting the equal-weighted S&P 500 P/E at 17x, which is only a slight premium.  I think this shows that the mega-cap dominated indexes continue to be driven by zombie capital and that there is still plenty of room for individual investors to choose smaller winners.

More importantly, note that real estate valuations barely rose.  Bank stress test results will be available after the bell on June 27th, but the Fed also reports that the majority of debt no longer resides with banks.  Yet the FSOC has refrained from naming institutions like Apollo as systemically important since its initial round that started with GE in 2013, and there is unlikely to be any further progress under the current administration.  This is not an immediate threat to the market, but it also doesn't look sustainable.  I think home prices are the key.  We'll see who blinks first, home owners or the Fed, but I don't foresee any scenario where the short term tendency for stealth inflation to initially be reflected in stock markets can extend beyond next year.

As for corporate news in the meantime, it's also worth mentioning that SATS rose 40% after the bell on Friday, after it was reported that Trump met with EchoStar's Chairman and urged the FCC Chairman to "cut a deal" on spectrum.  Despite the movement in SATS stock, I'm not alone in seeing this as the opposite of adhering to principles and the rule of law.  I'll follow up when we see to what extent EchoStar is willing to call this raise.  I note that Ergen has lost most of his $20b fortune over the past decade, and if EchoStar cedes any spectrum without adequate compensation, it will have folded to another shakedown, losing even more money in the process.  If it falls, there are new entrants ready to do better, doubtless followed by more profiteering from White House connected entities.