Since the S&P 500 hit an 11 year low of on November 20th, it's risen 24%. Does this have anything to do with President-elect Barack Obama? I have absolutely no idea -- but it could. That was the week when Obama cut back on talking about how there was only one President at a time and began to assemble and announce his economic team.
This was also the time I began to notice that some stocks in my newsletter started to go up. And yet the drumbeat of bad economic news continues -- with the latest being the worst decline in global manufacturing activity in 60 years. The big question for investors is whether the 24% rise in the S&P 500 is the end of a bear market rally or the beginning of a bigger one.
The only rationale I can think of for a rise in stocks is that investors may have concluded that the stimulus plan -- which has been rumored to be potentially $1 trillion -- could boost specific stocks in 2009 as that money begins to create jobs for companies that build roads, bridges, and broadband networks across the U.S. Alternatively, today's rally could reflect investors' realization that with money market and bank deposit rates near zero -- the only way to put all that cash to work is to move into stocks.
Are you participating in this Obama rally? Or do you think it's a head fake? How will you decide it's time to move your cash off the sidelines?
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter
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Reader Comments (Page 1 of 1)
1-05-2009 @ 1:53PM
DivaEl said...
The Obamabotomy: it's like a lobotomy, only instead of cutting through your frontal lobes, they add a new part of the brain that causes you to blindly worship Obama.
1-03-2009 @ 1:42AM
laughing said...
Obama has nothing to do with the rally. He is the first President-elect who acts like he is really President and the media thinks it is true. It is not and the current President, whether you like him or not, deserves the respect accorded to the position. He should quit acting, as he would not receive an Emmy, and continue to ask GWB the questions he needs to get on board running.Hold off on Mt.Rushmore until after 1/20/09.
1-03-2009 @ 4:11PM
william lindblad said...
The markets respond to the speculative and waiting on the administration change and what has been said, has caused a burst of optimism.
T'will be interesting. Sounds like a hodge poge approach taking ideas from the past and present. In any case any action is better than no action but even if Congress responds quickly, most of what is being mentioned will take months to have any effect.
Although the analysts are preaching a return of a bull market the reality is that this appears as little more than hype. They have a vested interest in this type of forecast as they, and their respective jobs, are not too secure if the market remains a bear.
The outcome will hinge on the consumer and the restoration of confidence. You can't have one without the other.
My outlook - pessimistic. I don't think this will bottom until June.