The indices came roaring back in July and the S&P 500 topped 1,700 for the first time ever late last week. The volatility index has relaxed and is now lower than it was at any time in June or July. The S&P has also managed to climb back up into its channel. Since 1987, August has been one of the worst months for stocks so it will be interesting to see if the trend holds up.

Gold and silver had a good month, recovering from their lows at the end of June, but they appear to be taking a breather and may be on their way back down to re-test those support levels. Oil gained almost 9% in July and we all experienced the increase in gas prices that caused the consumer-price index to jump.

Housing data is murky, as usual. New-housing starts fell almost 10% in June and existing-home sales fell 1.2%, but new-home sales for June hit the highest rate in 5 years. Home-builder confidence jumped to a seven-year high in July.

The Fed is calling our current economic growth "modest to moderate", and just today said banks were making it easier for people to borrow money. Moody's raised the country's credit-rating outlook from "negative" to "stable", and consumer sentiment hit a 6-year high.

Rather quietly, the Commerce Department recently changed the way it calculates the gross domestic product and adjusted the data all the way back to 1929. On average, the GDP is about a tenth of a percent higher looking at the entire period. Slicing it up a bit, the periods from 1959-1992 and 1992-2007 are essentially unchanged. The big move is in 2012 where the "definitional changes" increase reported GDP from 2.2% to 2.8%.

The major differences in the "definitional changes" are reportedly, "better data on consumption, farm inventories and government spending." I'm not convinced that borrowed money, spent by the government when they are $16 trillion in debt should be counted as part of GDP. This sounds a little bit like manufactured credibility for a flawed economic policy to me, but then I'm not one of the PhD economists coming up with this stuff. I'd just appreciate it if what they did passed the sniff test, and this doesn't.

Friday's unemployment numbers were a little soft. The economy created 162,000 jobs. Analysts expected 180,000. The unemployment rate dropped to 7.4% from 7.6%. May and June jobs were both revised lower by 26,000. More fishiness and more revisions to come, but the Department of Labor reported most numbers were unchanged, but something had to change to see that rate lowered by two tenths. I suspect a larger than reported decline in the workforce again. I can't make their numbers work this month.

Several economists are lamenting the employment data, claiming it indicates underlying weakness in the recovery. More part-time jobs are being created than full-time jobs. The average work week and average hourly earnings both slipped as a result of the bias towards part-time and lower-wage jobs.

I'm going to keep things short this month, but I will respond to the question that seems recently most-prevalent. Everyone wants to know what happens to the markets when the Fed finally starts "tapering" quantitative easing, or cuts it altogether since even the mention of it drove markets lower last month; and how rising rates, if we ever see them will affect their investments.

Our crystal ball is out of commission, but I found a great article by Dr. David Eifrig, editor of Retirement Millionaire that puts things nicely into perspective.

Whether you're a trader or an investor, the most-common warning you'll ever hear is, "Don't fight the Fed." It means you shouldn't try to outthink the central bank or anticipate its next move. Markets react, or over-react almost instantly to any news out of the Fed, but the central bank's influence on monetary policy and the economy takes months to make a difference. The reason investment pros tell you not to fight the Fed is because they get caught on the wrong side of that trade more often than not.

I've typed this many times. History doesn't repeat itself, but it rhymes. So, one of the best things we can do to get some idea of what to expect when the Fed starts raising rates is to look at what the markets have done in similar situations in the past. Take a look at the chart below.

The shaded areas indicate times over the past 40 years when the Fed was increasing the Federal Funds rates. The average amount the stock market increased during those times was 14%, and you'll notice that the markets did very well when the Fed Funds rates were much higher than they are now. So, what happens if the Fed comes out tomorrow and says everything is great, the economy is humming along and we're going to raise rates and end the stimulus program?

I believe stocks would tumble for a few days, or maybe even weeks following such an announcement, but I also think they'd come roaring back for the very same reasons. What's not to like about a growing economy and less money printing?

What does this mean for clients and their portfolios? We will be a bit more-willing to take some profits off the table as stocks push to new highs. We'll also be quick to limit losses on new purchases to avoid getting caught up in a temporary correction. Even though bonds are selling off a bit, we are not in a hurry to dump them because similar-yielding alternatives are difficult to find. Lastly, we'll view a selloff as an opportunity to get into some great stocks at a discount.

In closing, Vicki and I are very pleased to announce an agreement has been reached with Mr. Chris Jungmann and Sandia Investment Advisors, which is also here in Albuquerque. Chris is closing his advisory business and being retained as an investment consultant to Crow Financial. His clients will become ours and will now have the advantage of discretionary portfolio management, and our clients will benefit from Chris' outstanding research and analysis.

Please don't hesitate to call or e-mail if you have any questions, and we'll do this again in September.