Originally published by AxiTrader
For quite some time now I have been writing that the rally in stocks is less about Donald Trump and his presidency and more about the improvement in global economic data flow that occurred almost simultaneously with his election victory.
My thesis was, and is, that belief Trump will deliver an economic stimulus in the US - and thus the globe via a stronger dollar - gave traders room to believe the economic data beats rather than focus on the enduring challenges the global economy faces.
Regular readers have seen me use the chart of the relationship between the Citibank G10 economic surprise index and the S&P 500 as evidence of it.
But as the Trump trade in stocks stalled during March amid questions about his ability to get measures through the Congress, so too has the ability of the data across the US, G10, China, and especially emerging markets, to beat expectations.
It's not a guarantee of lower prices. But it is a warning for stock market bulls across the globe. 
To recap. What we are looking at here is the move in the Citibank G10 economic surprise index (a calculation of how much better, or worse, data is printing against expectations and forecasts) versus the moves in the S&P 500.
Clearly this is a linear relationship, not an exact mathematical correlation.
But one of the things the professors at Monash and Macqaurie universities taught me and my classmates was that it's easy to be tricky with charts and statistics but that if you are using such tools folks reading your research should be able to rely on your analysis.
So it is important to highlight that I believe there is a reasonable causality behind this correlation.
That is with the data consistently - and strongly - beating expectations across the G10, China, and emerging markets more broadly traders were free to reevaluate expectations for growth and earnings for companies in the US and across the globe.
So yes Trumponomics was important, but this causality of stronger data, and evidence of a turn in the global economy, gave them the impetus to increase their bets on growth assets such as stocks.
But it is in this causality that I am also reminded of the robot from Lost In Space. He used to roll around swinging his arms bleating "Danger Will Robinson". Things were never that bad and Will always got out of trouble but the robot certainly saw the risk.
So think of me as the financial markets robot when I highlight that last week's run of Citibank economic surprise indexes across the planet were almost universally weaker. That doesn't mean the economy is necessarily weaker - just that economic forecasts have now been recalibrated to higher expectations.
That's important because through time the economic Surprise indexes tend to be mean reverting as forecasters over and under estimate the continuation of strong or weak data.
So it's worth noting that as G10 data stalls EM data is reversing swiftly.
In the end then the corollary of this relationship between the economic data and the Trumponomics rally is that if the data continues to revert back toward forecasts - rather than beating them comprehensively - then the notion that much is built into the cake could take hold. That would threaten the rally in stocks as weak longs exit.
So it's worth noting that the latest Reuters poll of US stock market strategists showed "shares will gain less than 3 percent between now and year-end".Reuters reported that "the S&P 500 will hit 2,355 by mid-2017 and finish the year at 2,425, just 2.8 percent above where the index closed on Tuesday".
That seems to fit nicely with my idea that on a very long term scale the S&P 500 may be at or near a high in the 2400/2433 region.
Naturally the stalling of data beats is very different from a weak economy. But stock and other markets discount reality and data very quickly. So if the data continues to stall and heaven forbid if last week's German and Spanish inflation data is a prelude to a flat spot in data releases
But stock and other markets discount reality and data very quickly. So if the data continues to stall, and heaven forbid if last week's German and Spanish inflation data is a prelude to a flat spot in data releases, then stocks may struggle to hold recent strength.
Danger Will Robinson!
Have a great day's trading.