Market Rally Based On Dubious Assumptions
From Streettalk Off The Street
January 18, 2013 - 11:13am
January 18, 2013
Despite the problems facing the U.S. economy, the dysfunction in Washington and slowing global growth, stocks continue to rise on the basis of what we view as false assumptions. These assumptions are as follows:
1) Since almost every central bank in the world is aggressively easing, the market cannot go down.
2) Although the U.S. is facing a fight in Washington over the debt limit, the sequester and the expiration of the annual federal appropriation, various political threats over the last two years have passed without substantial market damage, and the same will happen this time.
3) S&P 500 earnings will rise to $108 in 2013, resulting in a current P/E multiple of only 13.7.
4) The economic recovery will kick into full gear once the problems in Washington are solved or again "kicked down the road."
We disagree. Despite massive ease by the Fed and st...Continue reading this article »