When is this rally going to end? That is what a lot of investors want to know. After all, the recent spike in stock prices has been a little, shall we say, surprising. If the economy is so weak the Federal Reserve feels the need to dump another couple hundred billion onto the fire, why then are investors so keen to buy equities? In a simpler time, this might not make sense; however, this is not a simple time.
Frankly, they don’t teach this type of stuff in business school; at least they didn’t when I was coming along. Maybe they will when my children are in graduate school; if they go.
Unfortunately, as the case may be, the answer to that very simple question, when is the rally going to end, is not as scientific as folks would like. Everyone wants a number, a chart, a date, or some form of technical analysis that boldly predicts: “THIS IS THE TIME AND THIS IS THE PRICE!” Instead, the message is decidedly mixed. Some folks are predicting financial Armageddon, and others are saying the good times are here to stay. Well, which is it?
As with the most things in life, the truth is almost always somewhere in the middle; meaning the stock market likely won’t fall apart just because, but it probably shouldn’t keep going up at its current pace for, well, ever. But that is a soft answer, isn’t it? Almost a little too dull and predictable.
So, let me counter with a question of my own: “what else are investors supposed to do with their money? After all, the Fed is goading us to do something, anything, with our money.” … September 21 2012 Common Cents