Wednesday, April 21, 2010

Why Is The Stock Market Going Up?

Unemployment is still around 10%, foreclosures are rising and inflation, taxes and interest rates have nowhere to go but up. So why is the S&P 500 up almost 75% and the Nasdaq nearly 90% from a year ago?

I've wondered this for quite a while, and it seems to be the topic du jour on wall street these days too - has the market overshot the fundamentals?

Don't take my word for it. Here's a quote from a recent NYT article:
Some analysts see ample reason for caution in equities, with many economists, including those at the Federal Reserve, forecasting tepid growth in the near term.

"The market is as overvalued now as it was undervalued a year ago," said David A. Rosenberg, chief economist and strategist for Gluskin Sheff, an investment firm. "There's a very high degree of complacency."

My take: There are few times in history when you can call when the stock market is due for a swing. Regardless of the direction the market is currently headed in, it makes sense to keep a sharp eye on things because they could be due for a drop in the near future.

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