What a week it was and it is starting off with more of the same! The day before Halloween the market gets spooked. The Dow drops 200 one day, rises 200 the next, and falls 250 to close the week. Yes, financial pundits could point to meaningful stories about the dollars rise, consumer spending sagging, the recession ending and so forth to explain market reactions but there is more to it than that.Even among the 15 positions discussed in Where should granny put $50,000? only the Vanguard Total Bond Market exchange-traded fund (NYSE: BND) and the Kellogg Co (NYSE: K) were up last Friday. Good thing I advised "granny" to put half her funds in the ETF.
For the most part, since March the market has moved up at break-neck speed only slowing to catch a breath on a few occasions. Today CIT Group (NYSE: CIT) put rumors and speculation to rest by declaring bankruptcy and Ford Motor (NYSE: F) surprised to the upside with a profit of $1 billion.
The volatility reflects investors emotions and speculative angst as to where the market is heading as they jump in and out of the market with each headline. This is quite different than it has been over the last six months when the market moved up no matter what the news.
My own sentiment is that the market will remain jittery for the next six months until we learn if our very modest economic improvement is sustainable without government subsidy. If the Federal Reserve raises interest rates, we might find that it is perceived as a vote of confidence and support of the dollar firming up the market and sending gold and oil down in the short term.
Getting back to Kellogg, which was the one up stock, Citigroup jumping on the bandwagon upgraded Kellogg to Buy from Hold and raised its target to $63 from $50 long after positive earnings were reported, followed by word of continued dividend payments and reporting a share repurchase program for 2010.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BND.
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