In June, the Standard & Poor’s 500 index ended its longest bear market since the 1940s, The Wall Street Journal noted, and has leaped up 28 percent since then, ending 26 July at its highest close since April 2022.

The S&P is up 19 percent this year overall, even though analysts are projecting corporate earnings to flatline into 2024.

With top-line inflation throttling back to just 3 percent in June, investors are gaining confidence that inflation can be tamed without the U.S. sliding into a recession.

That would be a 70-year record.

Since the 1950s, every time inflation has been significantly reduced, at least in part, by the U.S. Federal Reserve raising interest rates, a recession has followed, according to Deutsche Bank, with the average U.S. recession since the 1940s whacking 24 percent off the S&P’s value.

The signs are favorable: the labor market is strong, consumer spending has not yet cratered, and economists think the U.S. GDP will tick up in this year’s second and third quarters.

However, all the news is not good.

The Conference Board’s economic index fell in June for the 15^th month running, its longest slide since the spring of 2007 into 2009 during the brunt of the Great Recession, paralleling a recession during much of that stretch.

Also, the bond market is inverted: for more than a year, the 10-year treasury note has carried a lower yield than the two-year note, the longest flip since 1980. If short-term notes pay better than longer-term securities, that can signal investors’ belief that the Fed will have to cut rates in the future to revive an ailing economy.

Last week, the S&P traded at 19.7 times its projected earnings over the next 12 months. The ratio was 16.8 last 31 December. The 10-year historical average is 17.7 times, indicating the market could be due for a correction.