So much doom and gloom is out there these days that it’s hard to come up with new things to write about in the financial and investing news world. Most sites could have put up a banner headline reading “Uncertainty and EU debts weigh on stocks” last month — and would have had it covered.
Maybe I should have just gone to the beach for all of June …
But the market can’t stay down forever. Yes, it’s true that the S&P 500 index is right about where it was back in late January, giving up its early 2012 gains. And it’s true that we’re right about where we were in January 2011 and still significantly off pre-recession levels.
Still, the improvements of the last few years aren’t insignificant. We’ve made progress on unemployment, we’re flirting with a bottom on housing and we’ve seen a huge increase in corporate profits.
Why is the market still flailing around, you ask? Well, because some serious doubts are preventing investors from going “all in” right now. But if a few of these major issues are dealt with, there’s a chance we could see the return of a raging bull market on Wall Street.
It’s naïve to think that all of these issues will resolve favorably in the near future (or ever), but if just two or three of these things come to pass by year’s end, it could spark a major run for stocks.
Stability in Europe
Spain is borrowing at usurious levels — comparable to what I’d pay if I ever carried a balance on my credit card (which I never do). The Vanguard MSCI Europe ETF (NYSE:VGK) is down almost 20% in a year vs. a roughly 5% gain for the Dow Jones Industrial Average. If it weren’t for Germany, the entire eurozone would be in recession. Need I say more? If Europe can get its act together, a mountain of uncertainty will be removed from the market and the global economy.
U.S. Unemployment Under 8%
I personally am quite bullish on the U.S. economy long-term. But it’s admittedly difficult to be thrilled about the 8.2% unemployment rate for May, and the headline number rising for the first time since June. And some forecasters are expecting that rate to rise again before year-end, possibly as high as 8.5% according to some sources. If we could put a seven on the front of that underemployment figure by Christmas, things would be mighty nice on Wall Street just in time for the seasonal strength that typically ends each calendar year.