Friday, June 25, 2010

Headwinds & Market Messages

The stock market for the past year has been supported by numerous economic and financial tailwinds that have helped propel it to retrace a significant portion of the 2007-2009 decline, roughly a 61.8% Fibonacci retracement for the S&P 500. That said many of the prior tailwinds have become headwinds leading to a deceleration in stock prices. Looking at various indicators suggests that these headwinds are likely to continue through the bulk of 2010 and implies a potential economic growth scare. Moreover, with a slew of potential market wild cards (BP oil spill, Euro debt crisis, China economic deceleration, US state fiscal nightmares) filling the investment landscape it would not take much for a growth scare to turn into a double-dip recession. Clearly the time to be bullish was in 2009, while at the present time capital preservation is likely to be the order of the day. (more)

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