Subscribe
Good Morning!
Stocks rallied for the sixth consecutive week as investors continued to use pullbacks to accumulate or add to existing positions. Although modest, after such a run-up, many find the rally encouraging with some believing that it is the beginning of at least a cyclical, if not secular, bull market. Time will tell. Skepticism is high. However, regardless of the nature of the rally, we believe that after a period of consolidation that could begin at any time, this rally still has legs. We find it encouraging that the economic, corporate and consumer data has been coming in at or above expectations, indicating to us that the fifty-five plus percent drop from the top as registered by most major indices had priced in a severe recession. It also has not hurt that President Obama has begun to look more decisive in his handling with the economy as well as other domestic as well as international affairs. Add to this the relaxation of mark-to-market accounting by the FASB and the fact that the downward trajectory of the economy appears, at least for the time being, to be slowing. That said, investors have a major hurdle to overcome over the next month or so as companies report first quarter profits. As noted above, don’t be surprised if equities take a breather. However, we would use pullbacks over greater than five percent to establish or add to positions.
As noted over the past two months, Mortgage-Backed, Corporate and General Obligation municipal bonds are very attractive relative to treasuries and we strongly recommend that investors take advantage of this. If you are looking out over the next two to five years, stocks offer compelling opportunities.
Dennis Fagan
Chris Fagan