The hurricane that hit Wall Street a little over a year ago has left an immense amount of carnage in and around the canyons of Wall and Broad. But like every other super storm that comes, cleanup always begins and people move on. The same can be said for big banks, investment banks, lenders, consumers and the entire global financial system as a whole. Opportunity always exists when fear is present. That opportunity has turned into what many believe is a bottom in the stock market. This past week, markets have rallied with the help of optimism from the banks and a lower price of oil.
But where do we go from here? I don’t know the answer to that question but I look at some current issues and give my best educated guess. From my point of view, the US economy is certainly slowing down, and has been for the better part of 3 quarters. Housing continues to show slim signs of bottoming which leads me to think that the consumer will spend less. But given where we are as a country with all that in mind, I have to look at it and say we will be ok. Things will turn, housing will bottom and we will gradually see a shift in the economic cycle. From a time standpoint, I see a economic recovery starting in the second half of 2009. We must remember that Wall St is a discounting mechanism, so stocks will rise now and meander later. Thats why its always wise to buy when fear is at its most potent. The largest gains tend to come from a small percentage of rallies in a bull market!
* I do not believe oil is going to fall to the mid 80’s likes I’ve been hearing of late. There has certainly been a shift in the mechanics of the trade on oil and natural gas. But from my point of view the long-term trend is still in place. The geo-political landscape is still littered with uncertainty. Demand is still surging in emerging markets and will continue to do so for the foreseeable future.
* In the global markets there is a plethora of cash sitting on the side-lines which historically has always benefitted the stock market.
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