Dion Money Management Blog   Money Management for Retirees and Their Families

Markets want to go higher and no amount of bad news can stop it. Dismal employment numbers were ground to dust under the rolling tank that is this bear-market rally. The S&P 500 Index opened higher today, after reaching its loftiest levels since early February in yesterday’s trading. The index is currently 25 percent above the intraday low that was set on March 6.
Job losses, on pace to push unemployment above 10 percent by the middle of the summer, have been ignored. Both the ADP number on Wednesday and the Bureau of Labor Statistics report out this morning failed to slow the rally. Although unemployment is a lagging indicator, manufacturing is a leading indicator. ISM’s manufacturing index climbed to 36.3 from 35.8 last month and a low of 32.9 in December. Anything below 50 indicates a contraction, however, so while things may be getting less bad, they are still getting worse. Consumer credit, commercial real estate and housing are still in decline, but silver linings are in vogue as investors search for reinforcement.
Earnings estimates are still down, but the rate of decline is slowing as well. UBS issued a report that detailed the better-than-expected rate of change and showed most of the biggest revisions were made in December and January. If investors extrapolated those declines into the future, then there is real reason for optimism today as they correct their mistake.
This week governments from around the world met and together pledged to do whatever is necessary to restore growth, stabilize the financial system, and build a sustainable recovery. Some of this rhetoric has been backed by action, and the U.S. has led the charge with significant monetary expansion over the past month. As these policies meet with data that verify potential economic stabilization, stocks have reason to rally further. While it may be too early to declare that this bear market is dead, we will continue to benefit from current appreciation and look for the market to establish a higher trading range in the near term.

Disclaimer