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5 Experts Sort Out This ‘Weird,’ Crazy Market

2012: The gains are there, but not the optimism

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Economic indicators are mixed, Europe alternates between a debt deal and a disaster … and we still have a presidential election on the horizon!

CNBC commentator Herb Greenburg perhaps put it best with the headline to a column this week, “Why Does this Market Feel Weird?”

Greenburg cites Phil Pearlman, executive editor of StockTwits, as saying, “You’ve had 12 years of poor market action. Even the hedgies can’t get it right. You have seen mutual fund outflows for so long … The world and the market have grown infinitely more complex and perception follows price.”

I’ve been chatting about these columns with several colleagues and wanted to share some of our thoughts with you. Feel free to spout off your own feelings in the comment section below, or hit me up on Twitter at @JeffReevesIP to continue the conversation.

Without further ado, here’s some more big-picture philosophy from a few market-watchers on why Wall Street just feels, as Herb so succinctly put it, “weird.”

No Patience, So No Recovery

I think the “weirdness” comes from the fact that investors, politicians and consumers have no grasp of history and no patience.

The financial crisis obliterated many jobs, businesses, retirement accounts and (silly as it sounds) dreams. It was arguably the worst crash since the Great Depression, and won’t be fixed overnight. However, we are ill-equipped to handle the rebuilding and recovery from this crisis because of our “now” mind-set.

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As 21st-century humans, we demand high-speed downloads, overnight mail and instant gratification. But now more than ever we need patience and perseverance to get through this mess. Just look at this ugly chart from Bill McBride at the blog, Calculated Risk.

A great nugget I found on The Reformed Broker references an Edward Jones and Opinion Research study that pretty much shows Americans feel a need to do something — anything! — to figure out this market. This despite study after study shows investors trade too much and hurt themselves by overthinking.

Investors can’t unplug the need for instant progress, even when it’s not possible. Thus the gradual growth in jobs, home prices and stock valuations shorts out their brains. Is it a recovery or is it a pending crash?

It’s like a thermostat with two settings — 45 and 95. Rather than be lukewarm, investors and consumers and businesses instead feel the need to keep cranking between the two settings.

It’s nearly impossible to get comfortable in that kind of household. And frankly, it’s only a matter of time before the A/C switches on and this red-hot rally gets put on ice.

Jeff Reeves, InvestorPlace Editor

Anything Can — and Will — Happen

The S&P 500 is up 11% year-to-date and just one big push away from surmounting its bull-market high, but I don’t buy it.

I have to agree with my colleague Jeff Reeves — there’s no sense in making any moves at least until after the election, and probably not until Thanksgiving. Yes, a run like we’ve had so far this year would be great news for an entire year in any year. Hell, a steady 11% annual gain doubles your money almost every six years.

But it’s hard to have much confidence in the market’s low-volume rally. Is the outlook for economic or corporate earnings growth really 11% better now than it was on Dec. 30, 2011? No. GDP forecasts for the U.S., Europe, China, Brazil, India — you name it — are lower now than they were at the start of the year. And so are corporate profit forecasts, the ultimate driver of share prices. Meanwhile, with the exception of housing, most of the data is softening.

Oh, and no one knows what his or her marginal tax rate will be next year.

Staying frosty with defensive dividend payers looks good here, and I wouldn’t be surprised to see the bond market keep chugging along, with the yield on the 30-year Treasury closing in on 2% (It’s at 2.78% now). Think it can’t happen? Tell it to the Germans or the Japanese, whose 30-year government debt throws off 2.27% and 1.86%, respectively.

— Dan Burrows, InvestorPlace feature writer

Article printed from InvestorPlace Media,

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