IS THE MARKET TOO COMPLACENT?
In the last month there has been a decisive change in investor sentiment despite very little change in the fundamental picture of the market (typical herd mentality). A new year and a new President have injected a lot of confidence into the market. That’s all well and good and I think the new President and the new year are positives for the market over the long-term. I just don’t think any of this positivity is going to be seen in the coming couple of months. Investors are buying stocks in anticipation of a quick turnaround which is unlikely to occur. The bottom line is that the economy and corporate earnings are not improving at all.
The current rally is nothing to scoff at. We’ve seen a 27% move in the S&P, a 40% move in oil, and a 64% move in Chinese shares. Those are staggering moves across the board. Once the euphoria of Obama and the enchanting idea of a 2009 turnaround subside I think investors will realize that not much has changed in the market and perhaps we’re getting a little ahead of ourselves. Buying at these levels is becoming increasingly risky.
