Huge news from the markets today: The Dow Jones Industrial Average hit 40,000 points for the first time. The number is splashed across financial news sources the world over (including Bloomberg), even though the index closed back below the threshold by the end of trading.

There was white smoke over the Bureau of Labor Statistics, sort of, on Wednesday morning. The key measures of consumer price inflation for April confirmed expectations for a slight decline, and alleviated growing anxiety over a possible reacceleration. Risk assets across the world spent the rest of the day exhaling deeply.

Here we go again. Brace for the latest dose of critical data on US inflation over the next three days, as the New York Federal Reserve publishes its monthly survey of consumers’ inflation expectations Monday, followed by the Labor Department’s report on producer prices Tuesday and consumer prices Wednesday.

Points of Return often argues for caution on stocks. It never argues to get out of them altogether. That’s because history demonstrates that over long time spans it’s very dangerous to be out of the market altogether.

Investors’ hopes for rate cuts this year have faded. The past quarter’s economic data showed that the inflation battle is not over; whether the Fed eases now depends on the data, a point Jerome Powell and the Federal Reserve have repeated ad nauseam.

The breeze of this earnings season has been near perfect. First-quarter earnings, now published by 80% plus of the S&P 500’s members, put the index’s profits on course for their strongest growth since the second quarter of 2022, when higher inflation and higher rates began to bite.

Many aspects of the economy are still being buffeted by the ripples from the pandemic, which makes precedents hard to apply, and should make everyone cautious as to their judgments. Housing market data is also, inevitably, reported with a lag.

It’s been a spectacular year for the US dollar. Using the popular broad dollar index, it managed to rise to its highest level since 2002 by the end of September. Since then, the greenback has endured a peak-to-trough fall of more than 9% and continues to trend downward.

Wednesday’s meeting of the Federal Open Market Committee is dominating all discussions. That’s inevitable. But if there’s one area where the Fed’s monetary policy could wreak changes, and where many Americans fear that it will, it is on housing.

It’s a binary world. To an extreme extent, opinions on the market are divided, and they are split on one key issue: Will the Fed have to “pivot” toward easier monetary policy in the next few months, or won’t it?

What lessons for today? Any intervention in foreign exchange markets must be credible to have any chance of working. And when the Fed takes a course that is out of sync with the rest of the world, stresses increase on the rest of the foreign exchange architecture.

How bad was the August US inflation report? Let me count the ways. It’s a while since a macroeconomic release has come as such a nasty surprise, but on balance the extremely negative market reaction to the numbers was justified; they’re awful.

“CPI Tuesday” doesn’t have the same ring as some other regular market dates, but there’s little denying that no single data release matters more these days than US consumer price inflation. Tuesday morning’s release on price rises in August will matter a lot.

Normally, this section of Point of Return closes the newsletter. Not today. If there was ever a great survivor, it was Elizabeth II, who has passed away after seven decades as Queen of England.

Global imbalances are growing ever more intense, and that’s visible most clearly in the incredible strength of the US dollar. It’s becoming quite extraordinary.

“The Godfather” has a quote for everything. Maybe, just maybe, it was Putin all along. Or perhaps its was Nikolai Kondratiev.

After German troops were defeated in a pivotal battle at El Alamein in 1942, he commented that it was “not the end, not even the beginning of the end but, possibly, the end of the beginning.”

If you wanted evidence that the worst of inflation might be over, the last two days have offered quite a litany.

If you have an aversion to the mathematics that go with the bond market, you’re not alone. It’s complicated and counter-intuitive, based in concepts that are hard to visualize.

For some reason, people are feeling good. Animal spirits are on the run.

After the US saw inflation hit its highest levels in 40 years (since the bond bull market started), fueling bets that the Federal Reserve would embark on the most aggressive tightening campaign in a generation, it seemed that the bear market had finally started.

Necessity is the mother of invention, so they say. And in this case, stupidity is as well.

We all know that the world as a whole suffered from a pandemic, and is now suffering inflation in its aftermath. But the ECB has to deal with three pressures that don’t affect the Federal Reserve.

People are negative. Really, really negative. Now, the question is whether that could conceivably be a good thing.

There’s no doubt what Monday’s biggest market news was in New York.

Why did the bond market make its latest swerve? In the current febrile environment, data that are generally regarded as distinctly second-tier can have a big impact.

With the Federal Open Markets Committee due to meet Wednesday, there was no way policy makers could guide the market on how last week’s awful inflation data for May had changed their plans.

How bullish are we feeling? If the American Association of Individual Investors’ weekly survey is anything to go by, not very. It has been carried out for decades and is much followed as a measure of sentiment. Retail investors are simply asked if they’re feeling bullish, bearish, or neither.

As quarters go, this was one for the record books. Taking three months, or a calendar year, to have any particular significance makes no sense, but it’s difficult to quell it. So, here is an attempt to summarize what’s changed in the last three months from the point of view of markets.

As of the end of last week, markets were in an emphatic “risk-on” phase. After the initial shock of Russia’s invasion of Ukraine, the S&P 500 had regained a stunning 6.6% in two days’ trading. I argued that the market was working on the assumption that Vladimir Putin would get what he wanted, and that the world could live with this.

Rather than attempt to follow every twist and turn of the geopolitical drama, or all the excitement in Washington, it might be best to focus on the most vital commodity market — liquidity.

If 2020 was the year we all learned about epidemiology, 2021 has taught us more than we ever wanted to know about inflation. Price rises had remained calm and controlled for four decades, ever since the U.S. Federal Reserve under Paul Volcker hiked interest rates aggressively in the early 1980s.

On Nov. 17, I led a TOPLive discussion with Benjamin Ho, Vassar College professor and author of “Why Trust Matters: An Economist’s Guide to the Ties That Bind Us,” which explores how relationships, expectations and human interaction shape the world around us — be it in trade, employment or democracy.

Investors are witnessing the “biggest U.S. fantasy trip of all time” in the stock market thanks to a clueless Federal Reserve, speedy stimulus and surprising success with Covid-19 vaccinations, according to Jeremy Grantham, financial historian and co-founder of the investment firm GMO.