Stocks have rallied this week and have helped to bring back some of the upward market momentum.  Tech firms like Intel and Nokia have really benefited from the latest surge as well as many financials.  It is uncertain as to whether or not this recent corrective rally will actually take hold or whether it’s just a bump in the road.  But it is certain that this week’s gains have put optimism back in fashion.  This in the face of a growing national debt and massive problems in the commercial real estate sector.

Commodities have rallied as well, mostly due to the Dollar Index’s fall from the 80’s back into the high 70’s.  This has caused yet another flight to the relative safety of gold, the hedge that the world relies upon in times of financial crisis, especially US financial crisis.  Gold and other commodities will likely see another decline in coming weeks, as one of two things will likely happen.  Either the economy will continue to pick up pace, reducing the need for hedging against economic disaster, or commodities and other markets will take a major hit as the US Dollar shifts back upward and into the 80’s.

All of this sideways movement has many investors making mountains out of molehills.  The bigger picture is quite scary.  The US alone will incur over two trillion in debts from the stimulus rescue packages as well as the interest on many of the loans and treasuries it has accumulated.  This will likely lead to inflation if an alternative means of dealing with this debt is not arrived at before December.  This inflation will bode well for commodities, especially gold, which holds its intrinsic value over time.  But for those left holding onto cash, it will be quite different.

Investors seem to have lost focus on the larger idea of trying to understand the market and its dynamics.  Many households in the US are saving more now than they ever have, and with the credit markets fairly dried up, have shifted their focus away from spending and on to getting rid of debt.  Every investor needs to focus on these basics before they can really strike it rich in any market.  What good is a $10,000 investment that grows at a 4% annual rate if that investor is not saving any money and has $100,000 in credit card debt?  They are paying far more in debt interest than they could ever make in a year of savvy investing.

To sum all of this up, if it’s even possible, it may not be too productive to become too wrapped up in the sideways movement of the markets this summer.  Sure there will be highs and lows, but the larger picture, and the larger question, are far more important than any 200 point rally in the DOW or a $30 jump in gold.  Many suspect inflation could spell the end of much of the middle class, and could all but erase the efforts of millions of people to save more money as they dig their way out of debt.  Staying concerned with the bigger picture is important, but what’s most important is getting the US consumer out of their debt cycles and into real savings and investing territory.