Stock Market Fizz

I don’t usually talk about the stock market. It has very little to do with the real economy. The old adage that the market has predicted six of the last four recoveries is entirely apposite. Still even I find it hard not to notice the current run up in stock prices. The question being asked is: are we at the beginning of a new long term upward trend in stock prices?

No.

The market is always trying to play up whatever glimmer of good news it comes across. Right now we have seen a few, and I mean a few, signs that the decline in our economy is slowing. The housing market appears to be approaching the bottom. Production has dropped like a stone but also shows a little life. And consumer sentiment is no longer catastrophically bad, it is merely really depressed.

So the stock market has bounced a bit over the past few weeks.

Be wary.

It is not at all unusual for the market to bump around during recessions, and a prolonged period of gain is also not unusual. Even in the height of the Depression there were months of gains.

But corporate profits remain weak. Unemployment is rising – we are expecting bad data this week. And banking is mired in its self inflicted crisis.

So treat this recent run of gains as fizz.

The smart money is still invested in safe places, and unless you’re Warren Buffet with cash to burn, so should you be.