The current Bull market that started in March of 2009 is still very much alive. The big debate is the Bull’s health. The S&P 500 is up 12% this year, and has come in the face of great skepticism. We call it cautious confusion. And it’s warranted. Looking back, we’re still recovering from a massive financial crisis that is 4 years in the making, but at times feels like just yesterday. When you look at the current challenges, both domestically and overseas, it is pretty cloudy… and dark. But manageable.
The three corrections over the past three years were all triggered by worries about the Euro Mess, concerns about stalling US politics and growth, and fears of a hard landing inChina. We still face them today. The subsequent relief rallies in years past came because disaster scenarios were averted or at least postponed by either Central Bank interventions or better-than-expected economic reports. Also key has been the solid and resilient earnings from Corporate America, which have kept a floor under stocks. So where are we now? In reviewing recent developments, which can be defined by our favorite philosopher Yogi Berra; “It’s déjà vu all over again.
US economic indicators have improved, particularly in Housing. The real estate market is finally moving off its bottom, which has been sorely missed from theUS recovery. It still has a long way to go, but very positive. Retail sales continue to be strong too. Combined with the Stock Market strength, the American consumer is feeling better. Despite the risks and lack of clarity due to the coming election, theUS economy is forging ahead.
Europeans may be on the right road as well. The European Markets have rebounded dramatically this summer on assurances from European leaders that they intend to continue to kick the can down the road. Of course, they’ve been doing so for 2 years now. The difference this time is that investors are gaining confidence that Euro leaders are finally moving toward a unified regulatory system for banks and greater fiscal and political integration of the euro zone.
We have a ways to go, and many events to take place before 2012 is in the books. The Bull Market will continue to get tested, as will investor patience, but ultimately we’ll continue to fight through.
Tune in Sunday to watch the Republican Convention kick-off. We expect lots of rhetoric about Medicare and Fiscal Cliffs. Just when you think you are maxed on political rancor, the Democratic Convention kicks off on Labor Day! If you prefer to avoid both conventions, the National Football League is in preseason mode while the World Series match-ups are crystallizing.
To leave you with more sage words from Yogi, which can help provide comfort heading into November;
“If you don’t know where you’re going, you might not got there”