12 Jan 2011 What Lies Ahead?
Posted at 15:38h in The Friday BriefSince stocks turned sharply up last September, they have been on a steady rise, with one notable 4% exception during the month of November. Economic news, both at home and abroad, has steadily improved, but not enough to explain the strength and duration of the rally. Likely much of the buying strength is coming as bondholders cash in profits and head for equities. About the same time stocks began rising, bonds began a steep descent on hyped up inflation worries with the 7-10 year Treasury index losing roughly 6%. More recently, domestic stocks have also benefitted from rising international, particularly emerging market inflation. As central bankers in the fast growing economies of China, Russia, and Brazil raise rates to control speculation, stocks in those countries look less favorable than in the US where rates are being held near zero by the Fed.