Monday, October 13, 2008
Markets Up?
Are the U.S. Stock Markets at a bottom? Are they at THE bottom? There was a huge selloff last Friday and then the markets rallied, although they did fall off at the end of the day. The Dow and S&P 500 finished negative on the day and the Nasdaq was slightly up for the day. Last week was the worst week ever for the stock market.
At this moment, the Asian markets are up. European markets are up. U.S. Market futures are up. The TED Spread is down but still very high.
If this is a typical post WWII recession and bear market then we should be at or very near a market bottom. But, we know enough to know that this is not a typical bear market or recession. Things that are different are not the same.
If this is more like the 1870 or 1927 crashes then the market still has a long way to fall and a long time before it rises. Compared to those scenarios there are many reasons for optimism. At least so far.
If the market rallies today will it be sustainable or will it be a sucker's rally? Is there still more de-leveraging and forced selling to come?
Some of the answer about the future of the economy and the markets will depend on governments action that is still yet to come.
We'll see. Clearly, the economy will get worse before it gets better. The stock market is expected to recover before the economy does. But is that now or a year from now? How does one weigh the risk of further falls against the reward of rises in value? Another data point to compare against:
At this moment, the Asian markets are up. European markets are up. U.S. Market futures are up. The TED Spread is down but still very high.
If this is a typical post WWII recession and bear market then we should be at or very near a market bottom. But, we know enough to know that this is not a typical bear market or recession. Things that are different are not the same.
If this is more like the 1870 or 1927 crashes then the market still has a long way to fall and a long time before it rises. Compared to those scenarios there are many reasons for optimism. At least so far.
If the market rallies today will it be sustainable or will it be a sucker's rally? Is there still more de-leveraging and forced selling to come?
Some of the answer about the future of the economy and the markets will depend on governments action that is still yet to come.
The chairman of the Federal Reserve is also one of the nation's pre-eminent scholars of the Great Depression.He must be an expert on the Great Depression because so far, he and Paulson and the Bush Administration have taken all of the right steps to create the conditions for another one. But again, things that are different are not the same.
Fed chief guided by lessons from Depression
We'll see. Clearly, the economy will get worse before it gets better. The stock market is expected to recover before the economy does. But is that now or a year from now? How does one weigh the risk of further falls against the reward of rises in value? Another data point to compare against:
The Nikkei 225 is now almost back to where it was in 1981 and has never made any attempt to regain its 1989 peak.
S&P 500 VS NIKKEI 225
Labels: economy
