15 May 2009 Traps
Posted at 15:57h in The Friday BriefHow investor outlook has improved since those dark days of early March. The S&P 500 remains 32% above its March 9th low despite recent announcements that Chrysler and GM are closing 789 and 1,000 of their dealerships, respectively. All signs suggest this is a confidence rally. The huge liquidity pumped into the global economies is driving short-term interest rates to levels that no longer hold any appeal for investors. They are fleeing the relative safety of short government bonds in pursuit of higher returns of higher risk instruments. With real estate down for the count, stocks and commodities represent the only game in town at the moment. Still some argue that the current rally is a trap, a bear market rally that will eventually falter. Our opinion is that the rally is a bit overdone, but it is for real.