My market forecasting models have turned quite positive for the next several months. The S&P 500 average is 5% above the long term trend, and an equal-weight version of the S&P 500 is 8% below trend, but it has been improving. The macro-economic basics for the market are uninspiring, but still acceptable. (GDP, corporate profits, interest rates, unemployment, inflation, etc.) But…

As I have been droning on for months, the key to the stock market future is what happens next with the unsustainable U.S. government deficit, at 6.28% of GDP, and a bit worse than last quarter. If the relative debt level begins to go down, then financial peace can prevail. But, if it continues to rise, it is just a question of time until the financial system “rapidly disassembles”.

Over the summer the U.S. government will plot its course for the future deficit with the two main variables being the FY2026 Federal Budget (One Big Beautiful Bill) and Trump’s magical tariff plan. Regardless of how the particulars fall out, it is obvious that the Trump administration is focused on providing bread and circus. The deficit will be as high as Trump and his minions feel they can get away with. Of course, they will simultaneously claim a tremendous victory against fraud, waste and abuse!

With the continuing gusher of deficit spending providing the party’s joy, my forecasts expect the stock market to bubble up until someone finally takes the punch bowl away. September and October are the months that usually call the shot, but there remains a distinct chance that The Trump Show could stage a spectacular summer finale in the form of a government shut-down.