In answer to the pleas of the citizens of Atlanta trying to save their city from destruction by fire, General Tecumseh Sherman wrote his infamous response “war is hell.”  As May draws to a close, it is war that worries equity markets.  Continued improvement of the economy has been insufficient to lift stock prices.  The declining dollar, Israeli-Palestinian tensions, and looming war between nuclear powers, India and Pakistan continue to suppress equity values.  It seems like that old malaise is back.

Investors spent the week coming to terms with the increasing likelihood of a slow economic recovery, mixed corporate news, softer retail sales, renewed terrorist threats, and general apathy.  The S&P was up two days and down two, not counting today.  It was down 1.3% for the week.  Our models were down only slightly though, due to the changes made over the last few weeks. 

Benjamin Graham, called the father of fundamental investing, said, “in the short run the market is a voting machine; in the long run, it is a weighing machine.”  A problem investors face today is that the ‘short run’ seems to be more like the long run.  Just how much longer the wrenching ups and downs will go, no one can say, but it is clear that the longer it goes, more people leave in disgust. 

“It was the best of times, its was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us . . .”  Charles Dickens – A Tale of Two Cities

The best of times seems like a distant memory in so many ways, particularly as we focus on all the bad news out there and ignore the good that peeks through occasionally.  There’s plenty of ‘darkness’ adding to our confusion, but there are hints of light too.  On Tuesday, Cisco’s Chairman John Chambers spoke of improving business.  His comments and his company’s results sent the markets soaring, as short-sellers covered their bets against optimism and buyers bet that the pessimism might be waning.  If only for a day, optimism was openly discussed and celebrated and the negative took a brief respite.