This week’s pivotal report is Monday’s Retail Sales release. Falling short of expectations for two consecutive months, this report reflects a cautious outlook among retailers, marked by disappointing earnings and a growing chorus of warnings about consumer spending. If retail sales disappoint again, signaling trouble for the consumer, brace for heightened volatility, potentially significant, as a slowdown in consumer spending raises the specter of a hard landing.

I’ve been writing the past few weeks about the fact that when valuations get a little ahead of themselves and everyone gets complacent, conditions are potentially ripe for volatility to rear its ugly head. That’s exactly what we got last week as the equity markets digested geopolitical tensions in the Middle East and a bout of tough Federal Reserve rhetoric. In fact, the economic data we received was decidedly positive for growth, however, that can be a double-edged sword when trying to combat inflation.

What’s not to love about a market that keeps making new highs supported by a positive economic backdrop, strong employment and a consumer that wants to get out and spend?

News that Apple is looking to use Google’s AI technology in future phones, Nvidia’s announcement of yet another new AI chip, and Micron’s posting of better-than-expected earnings coupled with the Fed raising their growth forecast and leaving three rate cuts in the dot plots propelled the markets to all-time highs.