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Going nowhere slow

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by Peter Switzer

It was high enthusiasm yesterday. However, the mood on Wall Street was indifferent but it was not excessively negative and that’s because good news is still outpointing bad news. And while this is bound to change because of Spain, Iran or the EU’s economy, there has to be a virtual army of nervous Nellie investors who went to cash who might be starting ponder whether they have been too cautious for too long.

This explains why there has not been a substantial sell-off and the comments from the Fed boss, Ben Bernanke, which implied firmly that he is not against further monetary easing to ensure that unemployment continues to fall, has served to add to the positivity.

That said, there is a little bit of nervousness with the VIX or fear index now around 15 instead of 14 but this is nothing. Any reading under 20 is good news.

By the way, Bernanke’s comments yesterday were meant to help the labour market but it should help the housing sector, which promises improvement but has had some false starts.

Overnight, the home price index was steady in seasonally adjusted terms but consumer sentiment fell in March from 71.6 to 70.2 but this is a nothing result and both these above economic readings explain why there is an overall resistance to gravity on Wall Street at the moment.

The focus has to be on mid-April when the big US firms start reporting again and if they beat expectations the Yanks could ignore the old rule of 'sell in May and go away'; instead they could buy in May and stay!

The challenges to this best-case scenario will be what happens in Iran with their nuclear ambitions, Spain with its rising bond yields, which is the big watch issue and the EU’s recession that many think will be better than expected.

As you can see, there are good reasons for not believing in the current bull rally but those who have hesitated recently have lost!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Wednesday, March 28, 2012

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