Or a flash in the pan? For those of you who bought in at the bottom (around a year ago) this has been great! Tech stocks are up, and the DJA is moving up and up. However, it seems to me that P/E multiples are getting huge again…and I still don’t see massive "Help Wanted " signs out in front of factories, stores, etc.
So is this rally for real? Or is it just reflecting the low interest rates (a CD I have has just matured…it yields less than 2.4%!)
Or is this the time to jump in to the market? Will see see massive runups in stock prices?
Another caution…gold seems to be going up in price…isn’t this a red flag?
I’m pondering what to do…or have i already MISSEFD the best buying opportunities?:o
I’ve been wondering this myself, and from the little research I’ve done it seems most of the experts are still quite uncertain also. While there have been some optimistic indicators such as a GDP growth of 3.3% last quarter, and new applicants for unemployment insurance has finally leveled off, but there is still not enough positive data to justify a rally of this size or speed. Personally, I think people are so hungry for a bull market they take any sign of hope and run with it. Even if it isn’t founded on a real sturdy economic situation the markets sometimes take on a life of their own. Case in point, dot com.
I’m a long-term holder not a market-timing player so this doesn’t affect me much, but if I were looking for an opportunity to jump into a rally I would be hesitant to choose this one, and if I had bought in at the low point a year ago I would think twice about selling off now. Until there is true closure on corporate malfeasance (not likely with a pro-biz prez in office), and on a larger scale until the external pressures from the War on Terror alleviate I’d say the stock market is still heavily subject to sudden and big swings. Just my $0.02 (in 1999 dollars).
Just read the fed report for the current quarter. They’re actually saying the quarter ending in Sept. Could show growth as high as 5%, and they expect the current quarter to end with growth of at least 4%. Manufacturing inventories are down, manufacturing investment is starting to increase, and other key indicators are all pointing up. They’re saying it looks like a ‘robust recovery’.
However, that doesn’t necessarily mean the market will follow suit. My biggest worry is whether or not the market is pricing risk particularly well right now. Another 9/11 style attack would probably be worse than the first one in terms of effect on the market, and a major incident in North Korea or the Middle East could cause a big drop in the markets. So I would kind of expect PE’s to be slightly lower because of it, and they’re not.