Stock market corrects from Overshoot to the downside

Posted by Tim
May 4, 2009

This line from an article on MarketWatch  gives in a nutshell why the stock market continues to rally:

Buoyed by earnings that are proving better than dire forecasts, U.S. stocks on Thursday moved toward solid April gains, with the Standard & Poor’s 500 index poised for one of its strongest months in years. via With earnings bar low, April strong for stocks – MarketWatch.

There is so much pessimism built into the the current economic forecasts that when economies follow their natural cycle and start to recover, the surprises will be towards the upside. The market has continued strong so far in May and the S&P500 is up 35% from the low hit in early March.

With the stock market historically being a 6 to 9 month leading indicator of an economic recovery, if early march was the true low for this economic cycle the overall economy should be showing positive growth near the end of 2009.

More on this topic (What's this?)
S&P Dividend Aristocrats under performing S&P 500 in 1Q 2009 (Dividend Growth Investor, 4/2/09)
Dividend Stocks to Avoid (Dividend Growth Investor, 4/21/09)
S&P 500: Day by day analysis. (Emerging Index, 4/6/09)
Read more on S&P 500 (SPX) at Wikinvest
Economy, Fear

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