The Dow Jones Industrial Average gained 245 points or 2.47% on a day that boasted these two contradictory WSJ headlines:
Good News Boosts Stocks
Fed’s Beige Book Points to Sluggish Growth
First, most markets offer mixed signals to investors consistently. Keep that in mind.
Second, market conditions do not change in a single day. In other words, today’s market is no different than yesterday’s. Nothing’s changed. In fact, the only good news I found today was that the DJIA, along with other major indices, went up. Up is good.
Stock markets go up and they go down. That’s what they do. Daily moves mean relatively little all by themselves. But strung together in a longer trend line they usually make perfect sense.
For instance, what you are seeing in the stock market is an investor base trying to determine fair valuation. If you consider the action zone midpoint as “fair value,” as I do, then it’s plain to see that the Dow can’t hold onto it. That’s investors telling you they see investment values moving lower – a.k.a. recession. This, of course, jibes exactly with current news and Market conditions.
So what is needed to elevate stock market values far beyond the midpoint?
I keep hearing that leadership is the solution. I couldn’t disagree more. We have a leader, who has led, and is leading. Remember, there is good leadership and there is bad. Also remember that governments control markets.
Like people, markets want to be stable and they want to prosper. Markets want to be free. This goes against government’s natural instincts. And right now, with a lackluster economy and massive national debt, the last thing American investors want is more of the same – more debt, more currency printing, and more government spending.
The problem in the American market is not that government isn’t spending enough, or that it’s not growing fast enough. The problem is that the free-market isn’t spending enough, and that it’s in recession. It’s time to reverse course.
With the same set of challenges facing us, let’s see what direction President Obama leads us in this time. He speaks tomorrow night.
Until then…