The Federal Reserve Beige Book indicated that the economy is declining less rapidly in all regions around the country. Such positive news reversed the markets and pushed stocks into positive territory. The question is whether this phenomena is temporary or the beginning of better economic times to come. We could argue that tax rebates, stimulus spending, and a rising stock market have resulted in a temporary blip in the economy and the near future should not be forecast to have similar growth prospects.
Earnings season is well under way and not all the news is or will be good as we saw Burger King tumble with their weak report. The market feels toppy but stocks continue to grind higher. Bull markets climb walls of worry and we are certainly worried. On the other hand, there is plenty of hope coming from investors and hope is a poor excuse for investing. We remain concerned with the massive levels of debt in corporate America as well as the piles of debt around the world. The economy will not display strong growth any time this year no matter how much hope is driving investors. This is likely a bear rally but the market is sucking in more investors who believe the bull is back. Only time will tell but the risks seem way too high to jump in to the market hook line and sinker.
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