The week that was : Stephen Marcus, my best friend when I was ten years old, albeit for a short period (more on that later), had a couple of gerbils as pets, Simon and Garfunkel. I suspect his parents owned the naming rights since no kid that age knew who Mrs. Robinson was or cared about troubled waters. Unlike their namesakes, the gerbils were not exactly skilled musicians, but man could they get that exercise wheel turning. Faster and faster, but no matter how hard they worked, no matter how fast their legs moved, they always ended in the same place they began. It's the same story with the S & P 500 over the last six weeks; aside from that brief flirt with volatility that broke the 110-day streak without a 1 percent move, the action is below the headlines as sector rotations — the legs that hold up the index — continue to move at a feverish pitch. Airlines, steel stocks — down 20 percent, the love affair with financials waning, hospitals, biotech and pharma slapping high-fives as repeal and replace crashed and burned, only for the legislation to be resuscitated midweek and technology just going and going, higher and higher. Health care, seemingly more hated than my Duke Blue Devils, was the second best performing sector in the quarter. Energy, despite virtually all non-US producers singing from the same book of hymns, suffered from being on the wrong side of a 1300 basis point discrepancy in performance. Treasuries, meanwhile, sucked in the traders, slapping them around for being short in expectation of more hawkish FOMC commentary only to rally from a 2.6 percent yield to sub 2.4 percent. But overall, the week that was turned out much better than most anyone's expectations, particularly after seeing futures tick down close to 1 percent on Sunday evening, the market proving it is much more resilient than Simon — or was it Garfunkel, who I accidentally stepped on as I shook him from my shoulder. Fortunately for Garfunkel — or was it Simon, he — or was it a she — it was a quick demise and, I swear, accidental. And there it is, the reason for my abbreviated friendship with Stephen Marcus. Observations: Resilient. But is its strength ebbing? Valuations remain full but catalysts for either a decline or rally are not apparent. But isn't that always the case? Of course it is and the reality is that news moves so quickly and is dissected, re-dissected and debated so far in advance of the actual event, that when it occurs, as with Brexit, the presidential elections, and now, the failure of Trump's healthcare redo, investors just yawn. But for how long? Long enough. The good news here is that the market angst over the administration's deliverables, infrastructure and tax reform has been somewhat muted by the aftermath of Friday's no vote. More importantly, however, is that the economy continues to improve. Strong consumer and business sentiment is and will drive spending. In perhaps its most basic form, and also maybe its scariest, is that margin debt is at an all-time high. It's significant that retail investors are that enthusiastic about the prospects for stocks, but also frightening, perhaps presaging a decline, that they are using borrowed funds to express that love leaving little room for error — or, perhaps, containment of a sell-off. The week that will be: No change from my letter of three weeks ago: continued consolidation within a narrow trading range, bigger moves being news dependent. Individual stocks and sectors, however, is where money will be made and lost. Treasuries, regardless of Fedspeak, as noted above, confined to a range with current direction leading to the upper end of yields. Look to Europe for performance as well. Le Pen is fading, populism receding and economies strengthening. So what's an ex-Goldman, now political player to do? I apologize; I should be more specific. So what's Draghi to do? Easy, he should fade QE, which he will as the outcome of French elections crystallize, giving the ECB breathing room to tighten. Germany, a much more important player in the EU, has their own elections this September, but Merkel's party has had some recent wins to their credit which make that election less of a crap-shoot. Europe is three to four years behind the US in its recovery, so dust off your old trade tickets and buy the same businesses that worked for you in the US. Or maybe, just buy an ETF because active investing is dead, at least according to Fidelity and BlackRock , the latest, and the biggest, asset managers to wave the white flag. I'm not as sure of that as others, but do know that when a fund, such as those, gets that big, they themselves become an index so why not recognize it, cut costs and get on board with the others who have exhibited better performance from their much less expensive methods? Isn't that the issue? Machine replacing man, the increase in productivity not captured in conventional, olden days measuring metrics. Most, fortunately, don't see the end coming. For if they did, perhaps the consumer wouldn't be so confident in the face of a bifurcated social caste; those with irreplaceable skills and those with none. For now, though, party on. (Mr. Weiss is the managing partner of Short Hills Capital Partners, a hedge fund advisory firm and asset manager primarily established to invest on behalf of one of the industry's most successful hedge fund managers. He has held senior management positions at SAC Capital, Salomon Brothers, Lehman Brothers and MSW Asset Management. He is the author of two investment books and a novel, is a visiting teaching fellow at UNC's graduate business school, Kenan-Flagler, and a CNBC contributor appearing regularly on "The Halftime Report.")
