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Of late, Mr. Market has seemingly begun to look a little more on the sunny side, instead of remaining moody and depressed which was his prevailing mood for the past 17 months. Just to remind, the Singapore Stock Market's index (STI) has risen in 4 straight weeks, with only 5 "down" days out of a total of 20 trading days (meaning 25% down, 75% up). Many may recall that it was only on March 6, 2009 when the Index hit a 5.5 year-low (of 1,456.95), after which it has so far rallied around 25% to its current level of 1,820.87. The sharp rebound has had many pundits and investors shaking their heads and rolling their eyes, and provided no end of amusement to the author of this blog (yours truly). I will proceed to explain why below, so dear readers, please be patient and read on.....
Interestingly, most analysts and economists who were interviewed were decidedly bearish and pessimistic. They pointed out (rightly so) that the economy had yet to bottom, manufacturing data was still weak, exports had fallen off a cliff and unemployment (in the USA and Singapore) was set to increase even further. Against such a bleak backdrop, how could rallies possibly sustain and how could Mr. Market be perceived as being more sunny and optimistic for an extended period of time ? The even more cynical ones point out that corporate results reporting season is due in a few weeks' time, and the probability of more companies reporting dismal earnings and lower profits would cause "reality" to sink in and give Mr. Market a blow in the face for being too exuberant. In short, there's nothing much to look forward to given that data, numbers, facts, figures and sentiment are so poor right now. Even if there was some hope that things were "bottoming out", these experts are quick to point out that more certainty needs to come along in the form of hard data to justify any cheer that the gloom is about to lift.
The above paragraph shows the distinct difficulty in what investors would term the "tricks" of Mr. Market. To quote a very over-used cliched line: "Bull Markets climb a wall of worry". This basically means that a bull market has to overcome an amazing load of negative news, all the while reaching for greater heights and overcoming adversity (and doubt). The greatest difficulty faced by pundits and seasoned experts who observe markets is in differentiating between a bear market rally (of which many occurred during The Great Depression) and the start of a genuine bull market (or even if not, at least an end to the current bear market). Understandably, the confusion often lies in the fact that no one can predict future turn of events well enough to state if economies will recover, and how soon that will be, and to what extent. Investors are also unaware if markets have priced in the most pessimistic scenario in terms of earnings growth and industry doldrums, and thus prices only have one direction to go in future which is: higher. This confusion and lack of clarity is the main reason which keeps investors from placing their money in good, high quality companies for fear that "the bottom has not been reached".
Read more...[caption id="attachment_2200" align="alignright" width="192" caption="Photo by respres"][/caption]
Of late, Mr. Market has seemingly begun to look a little more on the sunny side, instead of remaining moody and depressed which was his prevailing mood for the past 17 months. Just to remind, the Singapore Stock Market's index (STI) has risen in 4 straight weeks, with only 5 "down" days out of a total of 20 trading days (meaning 25% down, 75% up). Many may recall that it was only on March 6, 2009 when the Index hit a 5.5 year-low (of 1,456.95), after which it has so far rallied around 25% to its current level of 1,820.87. The sharp rebound has had many pundits and investors shaking their heads and rolling their eyes, and provided no end of amusement to the author of this blog (yours truly). I will proceed to explain why below, so dear readers, please be patient and read on.....
Interestingly, most analysts and economists who were interviewed were decidedly bearish and pessimistic. They pointed out (rightly so) that the economy had yet to bottom, manufacturing data was still weak, exports had fallen off a cliff and unemployment (in the USA and Singapore) was set to increase even further. Against such a bleak backdrop, how could rallies possibly sustain and how could Mr. Market be perceived as being more sunny and optimistic for an extended period of time ? The even more cynical ones point out that corporate results reporting season is due in a few weeks' time, and the probability of more companies reporting dismal earnings and lower profits would cause "reality" to sink in and give Mr. Market a blow in the face for being too exuberant. In short, there's nothing much to look forward to given that data, numbers, facts, figures and sentiment are so poor right now. Even if there was some hope that things were "bottoming out", these experts are quick to point out that more certainty needs to come along in the form of hard data to justify any cheer that the gloom is about to lift.
The above paragraph shows the distinct difficulty in what investors would term the "tricks" of Mr. Market. To quote a very over-used cliched line: "Bull Markets climb a wall of worry". This basically means that a bull market has to overcome an amazing load of negative news, all the while reaching for greater heights and overcoming adversity (and doubt). The greatest difficulty faced by pundits and seasoned experts who observe markets is in differentiating between a bear market rally (of which many occurred during The Great Depression) and the start of a genuine bull market (or even if not, at least an end to the current bear market). Understandably, the confusion often lies in the fact that no one can predict future turn of events well enough to state if economies will recover, and how soon that will be, and to what extent. Investors are also unaware if markets have priced in the most pessimistic scenario in terms of earnings growth and industry doldrums, and thus prices only have one direction to go in future which is: higher. This confusion and lack of clarity is the main reason which keeps investors from placing their money in good, high quality companies for fear that "the bottom has not been reached".
Read more...
[/caption]
Of late, Mr. Market has seemingly begun to look a little more on the sunny side, instead of remaining moody and depressed which was his prevailing mood for the past 17 months. Just to remind, the Singapore Stock Market's index (STI) has risen in 4 straight weeks, with only 5 "down" days out of a total of 20 trading days (meaning 25% down, 75% up). Many may recall that it was only on March 6, 2009 when the Index hit a 5.5 year-low (of 1,456.95), after which it has so far rallied around 25% to its current level of 1,820.87. The sharp rebound has had many pundits and investors shaking their heads and rolling their eyes, and provided no end of amusement to the author of this blog (yours truly). I will proceed to explain why below, so dear readers, please be patient and read on.....
Interestingly, most analysts and economists who were interviewed were decidedly bearish and pessimistic. They pointed out (rightly so) that the economy had yet to bottom, manufacturing data was still weak, exports had fallen off a cliff and unemployment (in the USA and Singapore) was set to increase even further. Against such a bleak backdrop, how could rallies possibly sustain and how could Mr. Market be perceived as being more sunny and optimistic for an extended period of time ? The even more cynical ones point out that corporate results reporting season is due in a few weeks' time, and the probability of more companies reporting dismal earnings and lower profits would cause "reality" to sink in and give Mr. Market a blow in the face for being too exuberant. In short, there's nothing much to look forward to given that data, numbers, facts, figures and sentiment are so poor right now. Even if there was some hope that things were "bottoming out", these experts are quick to point out that more certainty needs to come along in the form of hard data to justify any cheer that the gloom is about to lift.
The above paragraph shows the distinct difficulty in what investors would term the "tricks" of Mr. Market. To quote a very over-used cliched line: "Bull Markets climb a wall of worry". This basically means that a bull market has to overcome an amazing load of negative news, all the while reaching for greater heights and overcoming adversity (and doubt). The greatest difficulty faced by pundits and seasoned experts who observe markets is in differentiating between a bear market rally (of which many occurred during The Great Depression) and the start of a genuine bull market (or even if not, at least an end to the current bear market). Understandably, the confusion often lies in the fact that no one can predict future turn of events well enough to state if economies will recover, and how soon that will be, and to what extent. Investors are also unaware if markets have priced in the most pessimistic scenario in terms of earnings growth and industry doldrums, and thus prices only have one direction to go in future which is: higher. This confusion and lack of clarity is the main reason which keeps investors from placing their money in good, high quality companies for fear that "the bottom has not been reached".
Read more...
