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Welcome to the American economic outlook, where if you can do the one-two shuffle, you are going to be one fabulous dancer. And today was just such a day for such astounding rebounds, which make one think that there have to be some NBA stars hitting hoops in the Dow these days. On Tuesday, the Dow Jones saw its sharpest increase of equities since 2007, a sign that many are taking to be that the economic recession of the mid-2000s has began to simmer down in favor of a healthier economy, and somehow in spite of the gloom and doom talks regarding the sequester by congress.
A syndicated report by Reuters revealed that the market was indeed a tad bit healthier today, newsworthy and notable. “Dow has gained nearly 9 percent so far this year, ahead of the S&P 500 and Nasdaq Composite Index. Ten of the Dow’s 30 component stocks reached new 52-week highs on a day when 418 stocks hit new yearly highs on the New York Stock Exchange,” the report said.
Most analysts said that the sudden influx in the market was mostly due to the relaxing of monetary policies by the Federal Reserve. But some added cautionary warnings that this shouldn’t be the end-all, be-all sign that our economic recover has concluded.
“Just because we’re testing old highs doesn’t necessarily mean the markets are going to capitulate. The underlying fundamentals still remain in place,” said Joseph Tanious, global market strategist at J.P. Morgan Funds in New York.
Many people are bracing for some turbulence as the sequester still kicks in nationwide. While some cities, like Detroit, have already taken drastic budget measures, others are waiting it out to see what really might transpire from looming budget cuts that took effect last week.
“It’s been a bumpy ride, obviously, the past few years, but it appears corporate America has proved its resilience once again,” Tanious said.
Tuesday, the Dow was on pace to break closing records that were set on October 9, 2007 at: 14,164.53.
Investors Are Still Leary
Needless to say, this nice bump does not negate investor leeriness. Many are optimistically positive but have a bit a of hindsight from recent years holding them back from making any truly major moves just yet. And many are still relying greatly on the Fed’s position to help wean the market back.
“It’s clear the economy isn’t ready to have the Fed leave,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York. “No one thinks we’re going into a crisis like we did after 2007, but the sense of play is very telling. Even though people are in the market, they’re very cautious and searching for yield.
