There were tons of people parking their money in a money market account that are moving back into the stock market. That’s a big part of it as well at least my take on it. Not that I know much, I just sort of follow it a bit.
Earnings from companies have been better than expected (they expected nothing), and many are expecting a good recovery, but most of the earnings increases have been from laying off people and cutting costs. They might be able to do it a few more quarters, but long term after we get tax increases (they have to come) and such I’m not so sure. The stock market to me seems to be anticipating earnings coming back to the 2006 levels, however at this point I’m not convinced, but I am in the stock market still, but watching for another bubble. I’m investing globally as well since I don’t think the US is the only place to keep money.
The question is why is the market anticipating a really good recovery. Maybe I’m a fool but I think this is more of the dollar losing 15% compared to other currencies in 7 month and the very cheap money that the Federal Reserve is putting in the system, rather than based on fundamentals like values of companies compared to earnings. To me I think focusing on earnings is key.
The federal reserve are trying to spur inflation in the midst of a time when credit is contracting, businesses are failing, and unemployment at an all time high, consumer retrenching. I think the stock market may continue going up until the federal reserve begins raising rates or another bubble bursts and brings it down.
he’ll probably remind everyone again that in the beginning of all this he told people not to panic…of course he also says that he knows that there are people hurting right now with loss of jobs and homes too.