Friday, February 25, 2011

Resilient market

Despite so many headwinds including the uprising in the Middle East, market is heading up higher. Consumers are buying more. Corporations are spending more, but still not hiring.

Corrections have been shallow and short.

Why market is so resilient?

There maybe a lot of buying on dips from retail and institutional investors. There have also been a steady stream of corporate share re-purchasing.

We feel that the Fed's accommodative monetary policy is the key here. Perhaps the wealth effect is creating the crucial virtuous cycle, which eventually will reach the lagging housing market and labor market.

But inflation is becoming a threat with $100 oil and $3+ gasoline.

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