How To Make Sense of a Pathological Rally

Stocks rallied for the fifth consecutive week, erasing the losses suffered by the Dow Jones Industrial Average and S&P 500 to start the year. Fears of recession have receded and investors are now fretting that they may miss out on the next big thing if they don’t dive back into the markets.
They should be careful what they wish for.
While it may be gratifying that the market didn’t fall completely out of bed in the first quarter, there is still ample reason to believe that we are in a bear market and that recent gains are going to reverse sooner rather than later. One reason stocks rallied last week was that the Federal Reserve once again refused to take an opportunity, when market conditions were relatively stable, to raise interest rates. That leaves only investors to worry about when it might actually decide to do its job.
Bets are rising on that time arriving in June with the employment improving and inflation rising. The Fed, however, has plenty of company in terms of central banks continuing the easy money regime that has dominated markets since the financial crisis.

This post was published at Wall Street Examiner by Michael E. Lewitt ‘ March 20, 2016.