It didn’t take long for the self-conscious euphoria of early January to turn into panic-tinged nervousness in late January. I don’t blame the market, after the brutal beating of early 2009, people have a right to be fearful.
I continue to be optimistic. At the base level, I think the markets are driven by the economy, and there is little doubt that things are improving. Of course, unemployment is still very high, but the stock market cares little about jobs–preferring higher profits with layoffs, over a guidance miss. The headlines of Greece’s debt problems seem highly overblown to me–the USA’s GNP is over 40 times higher than theirs, as is the overall European Union’s–I doubt Greece’s problems will be pivotal in the recovery of the global economy.
This latest pullback has again validated that diversification across asset classes has gotten tougher. Gold is looking like a Dow Jones Industrial rather than a contrarian play. The world economy, linked with optical fiber, looks more and more like a single entity –passing the emotional baton to the next geography at the end of the day. Only bonds and volatility buck the down trends now.
When will I admit that I’m wrong and embrace the bear? If the 250 day simple moving average starts going down by a point or so–I’ll bail. It’s been a pretty good trigger for the last 15 years or so.