The economy has been recovering from the Great Recession for three years now. And although it's an anemic global recovery the U.S. has been leading the way. Meanwhile, in its three-year bull market from the 2009 low, the stock market has doubled in value. Justifiably, since S&P 500 earnings have increased 125% since the end of 2009, their fastest expansion in a quarter century. The result of that is, in spite of having doubled in value in the bull market, the S&P is selling at a lower P/E ratio than before the bull market began.
It must be a puzzle to the doom and gloomers who were so sure in 2008 that the bailout of banks and automakers, and massive stimulus efforts were not only going to fail to rescue the economy but would send the U.S. into the next Great Depression and plunge the stock market further, into oblivion.
In spite of those dire predictions falling by the wayside, the big picture theorists have remained just as gloomy even as the economic recovery has been picking up momentum and the stock market has been rallying impressively off its October low.
This time is was that the eurozone debt crisis of the last two years would produce the Armageddon catastrophe they expected in 2008 from the bailout efforts.
And now even that prospect seems to be fading away. At least the fears seem to be fading from the headlines.
I can't find any references to the eurozone crisis at all in The Wall Street Journal Online this morning, let alone the types of dire headlines of a few weeks ago. It's all about the upcoming elections, the Facebook IPO, corporate earnings, and so forth, a return to normal news items.
The only eurozone stories in The Financial Times this morning, and they are on back pages, have headlines like ‘Italy's Banking Retrenchment Offers Signals of Rebound Hopes', and ‘Portugal Vows to Hit Reform Targets', and ‘Britain's Best New Export is Lessons in Intelligent Fiscal Policy.'
It's just not easy to try to forecast the direction of the economy or stock market, in either direction, with big picture analysis. As I have said so often over the years, by the time they are supposed to have played out conditions have almost always changed.
I'll just continue to let the market itself tell us what it's going to do through technical analysis of support/resistance levels, overbought/ oversold conditions, reversals of money flow, and so forth.
To read my weekend newspaper column ‘Let's Not Get Too Optimistic' Click here.
Subscribers to Street Smart Report: The new issue of the newsletter is in the subscribers' area of the Street Smart Report website from yesterday.
Yesterday in the U.S. Market.
Almost made a new high. The Dow was up 152 points mid-day, but gave almost half of it back by the close, especially in the final minutes.
The Dow closed up 83 points, or 0.7%. The S&P 500 closed up 0.9%.