Apocalypse Postponed, or Why the Market is up – courtesy of Ed Yardeni

by Marilou Long on October 10, 2012

in Credit Crisis,Debt,Foreign Markets,Geopolitical

Ed Yardeni has a very good explanation about why the market has been strong since early June.  Since we discussed “the most hated rally” in our recent letter, I thought that some excerpts from Yardeni’s Morning Briefing from 10/08/12 would be interesting.

The stock market loves apocalyptic scenarios that are postponed. As I’ve noted on numerous occasions since the latest bull market started on March 6, 2009 (when the S&P 500 bottomed at 666 on an intraday basis), “Apocalypse Now!” selloffs have been followed by “Apocalypse Not!” relief rallies. The S&P 500 rose to a new cyclical high of 1466 on Friday, September 14, the day after the FOMC voted to implement QE3. It closed at 1461 at the end of last week.

He then goes on to describe the various uncertainties that were postponed over the summer.  In Europe, the Greeks voted for a pro-Euro government, a European banking union was proposed, the ECB committed to unlimited QE, and a German constitutional court approved the ESM Bailout fund.  In the United States, the Federal Reserve committed to open ended QE and maintained the policy of near zero interest rates, or NZIRP.  Tensions in the Persian Gulf eased when it looked like an Israeli strike on Iran’s nuclear facilities would be put off until next year.  The fiscal cliff here at home and growth in China are the two negatives still to be addressed.

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