Nice continued move in the market today. I continue to believe that the economy is in a sweet spot where low rates continue to fuel economic activity, consumers are recovering, and businesses are eager to grow after 2 years in the trenches (doldrums). The S&P has edged up now for five straight weeks. Volume continues to be moderate. This trend of higher prices on medium to low volume is healthy to me. It tells me that retail investors are not piling back into the market, which would be signs of a overly optimistic retail investor (ie signs of the end of the trend).
In fact, headlines are pointing out that the market is hitting an 18 month high (or about September 2008). Incredible isn’t it? In September 2008 before Lehman went under we were already undergoing a recession in the US, following the collapse of Bear Stearns, and putting up with a hectic seizure of the financial system. Unprecedented in many ways. Anyways, at that point the US market was still only 30% below its peak in November 2007.
Yields on US Treasuries are edging up. The US 10 year yield is hitting nearly 3.9%, which is a relatively substantial selloff for the US Treasuries. It is likely there is more to come, but this is not the time. I think rates will rally from here and you will see the UST 10 at 3.5% within a few months.
Gold and Crude rallied really strong this week, with GLD hitting over $110 and Crude spiking to $85. Though historically speaking these are not outrageous levels, they are breakouts from recent ranges. This has clearly coincided with a selloff in the US Dollar (the EUR rallied to over $1.35).
