Editor's Note: Todd posts his vibes in real time each day on
Buzz & Banter
It's a brand-new week on Wall Street and the holiday cheer is
self-evident. Last week, we touched on
the scope and breadth
of this year's stock market rally-92% of the
(INDEXSP:.INX) is up 29% on average-and this morning,
an article from Bloomberg
suggests the rally will "pick up steam through year-end," if
history is a guide.
Looking back since 1928, shares climbed in the final two months 82%
of the time when the S&P gained 10% or more through October.
The mean increase for November and December was 6% which, if
accomplished anew, would target S&P 1892 into year-end.
The momentum is there, of course, but past results never guarantee
future returns. A prominent director of investment strategy was
quoted in the article saying, "Clients ask me, 'Why don't I take
profit now?' My theory is you can sell a lot higher later." That
may prove true; I just wonder how many others are thinking the
While bears will point to sluggish growth, uninspired labor
markets, and artificial stimuli that will presumably end one day,
the number of bulls seems to increase alongside the year-to-date
returns. Abby Joseph Cohen of
) is pointing to how inexpensive the market
on a P/E basis to start the year-and still thinks it is
"underpriced on a 12- to 18-month period."
As my friend Jeff Saut once taught me, "Where you stand is a
function of where you sit."
The bulls have some gravitas after a 160% rally the last four
years, just as the bears growled loudly in 2008 and 2009 after a
massive decline. It's the way of the world, particularly on Wall
Street where you're only as good as your last trade, perception is
reality, and fear and greed drives decisions.
Hands over ears and eyes glued to our screens, we might actually
arrive at the conclusion that all is well in the world.
The Federal Reserve may indeed induce a state of financial nirvana
if it can pull off Operation Rug Sweep
, but that requires a matter of trust and leap of faith. That
doesn't come easy for the masses who have suffered as a result of
the policies, but everything is funny when you're making money and
few want to hear about the other side of
trade right now.
With the market in no-man's-land through a technical lens, one
would be wise to define risk, maintain perspective, and remain
lucid. History has rarely been kind to investors who bought (or
sold) because everyone else was doing it; this time could be
different, for two months or longer, but we would be wise to see
) opens for trading on Thursday-presumably in 140 characters or
less-which will highlight a busy week for financial markets. Today,
the ECB will announce its rate decision (and perhaps further market
operations on Thursday), and October Non-Farm Payrolls will be
released on Friday, complete with an asterisk for the government