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Bulls and Bears

February 20, 2013 – 6:08 pm

imageThere is no doubt that the market is still marching up but that relentless move up slowed dramatically in February. Earnings season is over so what is pushing stocks higher? It appears two things are the source of a stubborn bull move. First, individual investors have been putting more and more money into mutual funds as seen in the flow of funds so far in late January and early February. Hedge funds have also placed some strong bull market bets. However, the second reason the market is holding up so well is because of mergers and acquisitions. We have had a number of very large deals: Heinz being bought out by Warren Buffet with help, American and U.S Airways merging and Dell being taken private. Each of those deals were over $20 billion.

Corporate consolidation should continue into the year as companies are flush with cash. European companies are also bursting with funds so we will likely see mergers from that source as well. Add that activity to an improving China and emerging markets should gain for most of this year. These are good reasons for a bull market.

Therein lie the seeds of the next downturn because after every bull market comes the bear, just maybe not this year.

Good Trading
Steve Peasley

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