Is Goldilocks in the House?

"An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. There are no exact markers of a Goldilocks economy, but it is characterized by a low unemployment rate, increasing asset prices (stocks, real estate, etc.), low interest rates, brisk but steady GDP growth and low inflation." - Definition of a Goldilocks Economy taken from Investopedia

I have surveyed all of my charts, data and other tea leaves to get a feel for the current rally that we are experiencing and all indicators point to higher.  Now as you know this flies in the face of plenty of my other blogs that I have posted but I have to take the data at face value and while I still do not trust the rally, outside of some economic calamity it seems to point to higher.  The question then is are we now in a Goldilocks economy and looking at the definition above, other than a stubbornly high unemployment rate it appears so.

Certainly we have low interest rates and rising asset prices.  GDP growth seems moderate and companies have just reported the highest profit levels ever.  Inflation seems tame by modern standards, crude oil prices are falling and with excess capacity from labor and factory output it appears that it will remain low.  The global economy seems moderately robust, particularly if you take the recent rallies in international stock markets as an indicator, copper is rallying signifying global economic growth and with gold and silver and the VIX down substantially the fear trade seems to be off.

On the surface all is well so it is no wonder that the Federal Reserve is exiting their quantitative easing stimulus and I would be highly surprised if they are not completely done with their stimulus by the end of October.  When you look at the dollar index it is breaking out to the upside and while this may hurt exports it does show support for the United States economy and allows the Federal Reserve to continue to issue bonds at low interest rates.  

Now while all of the above sounds rosy I have to expect that there will be some repercussions from the Federal Reserve exit.  The rally, now more than 1,000 trading days without a correction (10% price reversal) is very long in the tooth.  Also looking at the hard numbers from Europe, Japan, China and the United States while the ship is sailing it is dragging the anchors of debt, high levels of government intervention and high unemployment. Also geopolitical problems are currently at extreme levels and any flare up in the Middle East or Europe could spark a correction.  Until these anchors are raised I remain on the sidelines and watch things spiral higher.  Jumping in head first at these levels is like jumping off a bridge without the bungee cord attached.  So while the porridge might seem just right, it is cooling quickly and we know that too cold is just as bad as too hot.