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Market Direction

March 22, 2010 – 9:42 am

Everyone is speculating on a new pullback for the market after the recent 7% pullback ending in February. It seems a little early for another pullback but there is no doubt we will have one. Earnings season next month will likely mean a strong showing but that does not mean a pullback is not in our future. In fact I would suggest that it is more likely than less likely.

Of course we will have a pullback and that will be followed by another rally. This is the natural ebb and flow of the market. Some will try to guess the bottoms and tops despite the large body of evidence that shows it is impossible. What the prudent investor wants or should want to know is whether we will have another collapse like we did in 2008 any time soon. The answer to that is probably no. Interest rates are low, a recovery here in the U.S. is in place, as weak as it might be, and the world economy is growing twice the pace or more than the U.S. These are strong arguments against a sharp fall in stock prices.

Finally, with the health care debate over maybe our politicians can turn to the economy as the major problem we face. Or maybe we don’t want them to interfere. So far what they have done has certainly not helped the job market while they keep stressing that jobs is the number one problem. It would be nice if they took some economics classes then they would know that jobs are the last thing to appear in a recovery. Job creation is coming but it’s going to be slow and painful.

The biggest problem in the future will be debt. What will that do to us and when?

Good Trading
Steve Peasley

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