Is It Safe to Go in the Water Again???
Since the beginning of October the SP 500 is up a whopping 14% and is one pace to be one of the best months in recent history. What was different when we went to bed on October 3rd and woke up on October 4th? Greece, which always seems to be on the verge of default …and subsequently on the verge of being bailed out by the EU, still spends more money on a daily basis then it brings in…(that sounds like the roadmap to economic prosperity if I ever heard one). The US economy is still extremely fragile, and the Chinese economy is slowing. What has fundamentally changed in the global economy that has caused this rally?
The answer, it seems, is that investors are confident again. Europe seems to be getting its financial house in order. The US retail sector has shown surprising resilience and the expectations are that consumer spending won’t be all that bad during the holiday season. Adding to the positive feelings is that manufacturing and factory use is starting to trend in the right direction (albeit slowly), and non-farm payrolls are starting to move higher and jobless claims are starting to trend lower.
The stock market has viewed these as positive catalysts. The probability of a double dip recession is decreasing by the day and efforts to address the European debt crisis are being ironed out.
I believe that market volatility is here to stay. Sector rotation and dollar cost averaging techniques are going to become the new buzz words in the investment world. Warren Buffet put it best when he said “be fearful when others are greedy, and be greedy when others are fearful.”