As a longtime economic and markets analyst, I am well aware of the difficulty of predicting what the economy and the markets will do next. But in the current environment, it's more difficult than ever. To be sure, you should never try to time the market or base your investment decisions on market or economic predictions. This is a mantra of Chief Investment Strategist Alexander Green. If you read his columns in Liberty Through Wealth, you'll come across it in one form or another on a regular basis. "The key question for long-term investors," Alex wrote recently, "is not 'What will the economy do?' or 'What is the near-term outlook for the market?' - which can't be known anyway - but 'Do I have a sensible asset allocation?'" (If you haven't read Alex's bestselling book on setting up your foundational investment allocation, go here to get it.) Abnormal Times All that said, in normal times, economic data can provide some indication of where the economy is heading if you know how to read it. And markets will react to that data. Certainly, that's the case when the data begins to suggest that the economy may be headed dramatically up or down. But the economic recovery from the COVID-19 recession and market crash is nearly unprecedented in U.S. history. By many measures, it has been the most rapid recovery from a recession in the postwar period. For example, the precipitous drop in employment, followed by a soaring recovery, is something that living investors and policymakers had never experienced. Impossible to Predict The response to the crisis by central banks around the world has also been stunning. Together, these banks have injected some $1.77 trillion into economies since the pandemic began, according to Bloomberg. As a result of all this, forecasts about critical economic data series have been wildly off the mark in recent weeks. Chief among them was the April jobs report, which was released on May 7. Expectations were that the economy created about 1 million new jobs in April. But the data showed that the number was about a quarter of that - just 266,000 new jobs - resulting in one of the biggest forecast misses in history. And then there was last week's inflation report for April, which showed the biggest monthly jump in consumer prices in more than a decade. That report continued to weigh on markets at the beginning of this week, with the S&P 500 Index down more than half a point around lunchtime on Monday. And yet, the Federal Reserve says the inflation spike will be short-lived. But are Chairman Jerome Powell and his colleagues at the Fed confident in this diagnosis? I'm almost certain they're not. The Fed has the best economic prognosticators in the country, but they're guessing at this point. And if they don't know for sure, nobody does. Now throw in the fact that markets often react positively to negative data, as they did recently to the disappointing April jobs numbers, because they think it will keep the Fed from raising interest rates. Cryptic Cryptos And then, of course, there are cryptocurrencies, which are all the rage for many investors right now. They, too, are highly unpredictable - though on a different level. If you're trying to rationally forecast where the cryptocurrency market will go, I wish you the best of luck. You're going to need it. I have heard time and time again from crypto fans that Bitcoin and other cryptos are a hedge against inflation in fiat currencies. They tell me that when the Fed starts to inflate away our massive national debt by eroding the buying power of the dollar, we'll finally see the true value of cryptocurrencies emerge. Yet, consider that we got one of the worst reports about rising inflation in more than a decade on May 12. How did the price of Bitcoin respond? It sank about 20% in one day. Indeed, there's very good evidence that the prices of Bitcoin and other cryptos respond much more strongly to the musings of Tesla (Nasdaq: TSLA) CEO Elon Musk - whether in his tweets or his appearance on Saturday Night Live - than to any inflation data. And that is your "Weekend Update." Enjoy your weekend and stay safe, Matt P.S. If you're interested in a groundbreaking technology that seems poised to thrive no matter what the economy delivers in the near term, you'll want to know the one stock to own to benefit from it. Click here to see what Engineering Strategist David Fessler believes is that one magic stock. | 
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