Mar 28, 2010

Ken Fisher on Phase 2 of the bull market

It's a year since the bull market began, and I remain firmly bullish...

One year into the current bull market I like what I see: globally improving fundamentals plus strong societal skepticism. Snarky, cranky sentiment and better fundamentals are the classic ingredients of the second phase of bull markets.

Economic numbers globally and almost consistently keep coming in up and better than expected, while being largely dismissed in terms of significance. In part this is because the fastest recoveries from the recession are happening in the 25% of global GDP found in emerging markets countries. Maybe it's unnerving that China and Brazil are leading us. Americans are way too U.S.-focused.

My Feb. 8 column cited the "pessimism of disbelief," the tendency to see all news as bad, or, if good, as something likely to morph into something bad. (Typical formulation: Stimulus efforts either won't work or will cause inflation.) You can see this pessimism in mutual fund flows: For three years there has been a migration into bond funds--mostly into government bonds for safety--just in time for long-term U.S. government bond funds to return a --17.5% in 2009. That's fear.

For more on market sentiment, visit market blogs anywhere. The skepticism is wise-guy thick. Anyone posts something positive and they get pounded by the wiseacres. I love it. This is the wall of worry bull markets classically climb.

~ Ken Fisher, "Bull Market, Chapter Two," Forbes, March 25, 2010

No comments: