As we get underway in the US, I have to think back to last week when US President Barack Obama told us all to go long equities. "Buying stocks is potentially a good deal if you have a long term perspective on it." Since Monday, the S&P 500 has rallied 11%! We all should've taken him seriously at the time. (In reality, we all should've taken him seriously 12 mths ago!)
But it's always a matter of timing and this week proved to be the first week in a long time that rallies have extended beyond one day and beyond the last hour of trading. A good sign to be sure. Looking back, we had several items that were all pointing in the same direction.....even if some of them are a bit dubious.
(*Editor's Programming Note: Andy Busch Will Appear Live On CNBC's Closing Bell Friday March 13, 2009 at 4pm/ET*)
We had HSBC and Citigroup say they are having a good quarter. We had serious discussions in Congress over suspending mark-to-market and reinstating the "uptick" rule. We had US retail sales come out better than expected and positive for two months in a row. We had BofA say they don't need any additional TARP money and GM say they don't need any money to survive March. We had the UK begin a quantitative easing program. We had New Zealand and Switzerland cut interest rates.
We had Bernie Madoff appear in court and plead guilty.
We have the US Federal Reserve get the pieces in place to ramp up TALF. We have GE downgraded, but their outlook at stable. We have Congress question whether energy, health care, and education spending increases are the answer for a financial crisis. We have a G20 meeting this weekend discussing how to resolve the global recession and credit crisis. Finally, we have the Obama administration finally reach out to the business community and indicate they may cut corporate taxes.
Man, I hope we didn't use up all the positive mojo in one week!
Could it be that this is the bottom? This is the question many are asking from my friends at the train stop to the guard at the bank to my dry cleaner to students at the University of Nebraska Kearney to private wealth investors in Florida to distressed debt buyers in Chicago to the great crowd that came to the Illinois Policy Institute this week. Everybody is cautiously pushing the optimistic button and hoping it says "Buy Now".
The better question is this: has the market psychology hit a bottom? I would say emphatically, yes. Honestly, it could've have got much worse. We should now enter a period where news is interpreted through the prism of "We didn't die!" The NYTimeshad it right when they said that stocks rallied because, "Investors found the financial news not as bad as feared."
Well, this will only get us so far on the upside. To truly put in a bottom, we need to have the financial sector stabilized and functioning. We'll need more than relief from a near death experience for this to occur.
Read what others are saying on CNBC.com:
- China's Premier Warns Growth Target Will Be Tough
- Pros Say: Market Rally Could Last a Little Longer