In late January I posed the question, “did we hit a bottom?” If you have been investing as long as I have, the market always has a way of making you second guess yourself. Yet after falling another 500 or so Dow points shortly after that statement, the market finally began to reverse course.
Over the past four weeks, stocks have staged an impressive rebound from their February lows. The equity rebound of the past month is a classic “relief rally,” where investors are relieved that conditions are not as bad as they previously feared. This one has been partly predicated on hopes that China is stabilizing, which helps explain the sharp rise in commodity prices given that they are the biggest commodities consumer. Unfortunately, signs of real improvement in China are scant. While the U.S. appears to be stabilizing, the Chinese economy remains challenged.
So are the markets going straight up from here? I don’t think so. Over my years as an investment advisor I have noticed that markets will sometimes move in a similar fashion to a sprinter. You take off, running as fast as you can, and you then pause to catch your breath before attempting to run again. After an 11% advance, I think we will be pausing to catch our breath for a bit before attempting another run.
A tax refund may feel like a bonus, but breaking even is better. If you end up with a refund, you may want to reconsider how much you’re withholding from your paycheck. Read Here
