Daily Investment Interpretations
October 10, 2009
2009-10-10: Top Stock Portfolios has observed today that although the markets have risen because things aren't as bad as they were... things are less worse... ultimately, consumer spending is going to have to pick up the slack, and that's not apt to happen for years. When the markets face that "moment of truth", there could well be a resumption of the bear market. At the same time, the indices have advanced sufficiently to resemble previous bull market peaks within long-term (16-year) bear markets. Things are OK for right now, but we should be psychologically ready for a resumption of the bear market when it occurs. (That would mean liquidating stocks and mutual funds.)
Later: The latest (October 19, 2009) issue of BusinessWeek argues that the aggressive cost-cutting that took place during "The Great Recession" will pave the way for continuing profits and earnings over the coming year or two. It projects 2010 earnings on the S&P 500 at $75 a share. At a P/E ratio of 16, this would support a 2010 S&P 500 level of 1,200. Of course, in 2010, the markets will begin anticipating 2011 earnings.