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The current rally has been continuing for four months.
As I've written several times, a rally of this size in the midst of a calamitous stock market plunge is not unusual. I described in "Enquiring minds want to know: How long will the rally last?" that the stock market fell a full 90% from its peak in the years 1929-1932. During those three years, there were six rallies, including one 49% rally that lasted five months. So the current rally means nothing in terms of the overall direction of the market and the economy.
The Dow index crossed 9000 on Thursday, still 36% below its highs. The Dow is now at the level it was at in 1998, so we're not seeing an explosive new rally.
One reason that the rally is continuing is that 2nd quarter earnings are better than analysts had predicted. Earnings fell 31% from 2nd quarter of last year, when they had previously been expected to fall 35%. (See "Stock market rally raises cautious, anxious hope among investors.")
Today's mood must be something like it was in June, 1930, when President Herbert Hoover responded to a request with, "Gentlemen, you have come sixty days too late. The depression is over."
We've been discussing this in the Financial Topics thread of the Generational Dynamics forum. Please read through some of the recent postings there if you'd like further information, and feel free to contribute your own thoughts.
(Comments: For reader comments, questions and discussion,
see the Financial Topics thread of the Generational Dynamics forum. Read
the entire thread for discussions on how to protect your money.)
(24-Jul-2009)
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