If you are reading this I suspect the real Judgment Day was not this past weekend and the world did not come to an end.
Sell in May and go away? I think that may have missed the mark by a month. Today, the SPX is right near where it was on April 1 (see chart). The VIX is also virtually unchanged since then (see chart). Yet, if I were to tell you that commodities would embark on a massive correction, the banks and financials would be lower and major tech names would be well off their annual highs, you would probably argue against unchanged. The Dow is certainly higher as is the Russell 2K. The dollar is moving higher but is far below its highs, gold hovers near 1500 an ounce. How to explain it? This is the ultimate stockpicker’s market. There have certainly been disappointments but if you were focused and attentive the opportunities were there. For every Akamai there was a Green Mountain Coffee, for every Cisco there was an Intel or IBM. For every Google there was a Weight Watchers.
The market range has been rather modest. Since the beginning of April the SPX has moved within a 75 point range, hitting the lows when there was trouble brewing in Libya, while the highs were recently seen immediately following the death of Osama bin Laden. The VIX has been traversing an area between 14.3 and 19.3, clearly no fear of a market selloff or correction. In fact, with every rise in volatility players have been selling it in earnest. Does this seem rational, even normal? Nothing about this market environment is normal – so let’s put any conspiracy theories to rest. The crowd does not lack confidence as the search
for yield drives on. There really is no better place for return than in equities right now. Bonds? Sure, they are still in a massive bull market which one could argue has been in place for well over three decades. So many predictions of the apolcalypse of fixed income – yet we have not seen the signs or hint of it. If the Fed finds bonds a value (heck, they’ve been buying them for months with the QE2 program) then why think any differently?
Looking out into the future I suspect markets will be trotting down a similar path. Choppy markets, individual surprises and frightening drops around every corner. Who knows how the QE program ends, the most publicized event known to man. Bonds may garner some interest, perhaps the Fed continues to show their liking of bonds, keeping rates low while fostering a growth environment. The road is up but certainly may be bumpy. Issues in Europe and of course Asia may complicate matters, even stall growth. Fact is our economy is robust, perhaps some softness exists but for better or worse the economic engine we call the USA continues to roll ahead.
