In this morning's Wall Street Journal, Andy Kessler wrote an article called "Was It a Sucker's Rally?" I generally agree with much of what Andy writes. (Maybe its because he graduated from Cornell). In this case, I agree with some of what he writes, but not with the overall premise.
He attributes the recent stock market rally to three factors; that the worst case scenarios have not come to pass, short-term interest rates are non-existent, and the Federal Reserve has been printing an enormous amount of money and some of it has found its way to the stock market. I have said much the same over the past few weeks. Where I differ from Mr. Kessler is his idea that this has been a "suckers rally". My guess is that the title of the article was designed to get people to read it, so it has the be somewhat sensational.
I am not saying that everything will be great going forward. I really don't know how things will play out. What I do see is a bit of optimism about the economy, as witnessed by this blog post titled "Small Businesses Get a Bit More Optimistic" or this one called "Global Economy at Inflection Point"
There are certainly significant structural problems in the economy, some of which Mr. Kessler points out. But there have been similar problems for as long as I can remember. Yet, despite of these problems, the global economy has chugged along over the past 50 years at a pretty good pace. Yes, there are ups and downs, and we have been in quite a down for a while, but we will go up again at some point.
It is a good thing that our clients continued to keep some percentage of their assets in equities when pessimism was high in early March, as we were there to participate in the rally of the last two months. We think trying to time these rallies is next to impossible. There may be some retrenchment in the near term, or we may go higher still. No one knows! In the long run, we'll stick to our asset allocation plans that keep money needed within five years in safer places and money not needed for longer periods in riskier places.