After a quarter in which investors appeared to be having a bad romance with stocks, the market has been reeling off hits at a pace that would make even Lady Gaga envious. Now threatening to conclude its seventh consecutive winning session, the market appears to be shrugging off investor’s fears of a double-dip recession, instead focusing on the growing number of indications that economic activity is continuing to expand. Intel’s report that business spending on PCs is strengthening has fueled early buying this morning, although weakening retail sales and deflationary worries may pose a threat to the winning streak.
The market has been flirting with levels that technicians have been pointing to as important resistance points and should the markets breach those levels and hold them, the technical crowd is likely to climb aboard, turning what has been a solid rally into a monster.
With fears of the Eurozone debt crisis receding from investors’ minds, the likelihood remains that the market is a summer buy since it appears that we could be in the early stages of a rally strong enough to leave perma-bears speechless and bulls so happy that they could just dance. If that were to play out, bulls won’t be the only ones tapping their toes since a summer rally could boost Democratic chances for the midterm elections. Rising stock prices have the potential to stimulate household spending due to the wealth effect, and that could raise the likelihood of economic recovery. If it comes to pass, there will be no shortage of Washingtonians looking to claim credit. Some will actually deserve it.
While I’m not suggesting that they are about to be stalked by paparazzi, Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner could garner considerable praise if we manage to avoid the double dip. During his many Congressional appearances, Uncle Ben’s poker face has been a reassuring counterbalance to the uninformed posturing of our elected officials, while Tim the Enchanter has enhanced his once-shaky brand by gaining forex concessions from our Chinese underwriters. The fame that goes along with being known as the men who steered our economy past the shoals of economic collapse will be considerable, and it could ultimately redound to the credit of the man who nominated them to their posts.
He certainly needs the boost. The formerly starstruck electorate’s ardor towards President Obama has cooled considerably in the months since his election and he and his party desperately need to generate jobs and growth. Cynical types suspect that any and all efforts will be made to skew economic data towards the positive in the coming months and traders may be buying into that cynicism as a variation on the greater fool theory of investing. It remains to be seen if today’s market will be in positive territory when the money honey asks “do you know where you money is?” later this afternoon, but the shift in sentiment away from the pessimism of recent weeks is undeniable.
So, if the rally continues, expect Gaga-worthy performances as Democratic officials claim credit for the deliverance of our republic. 24-7 cable coverage has turned Washington into showbiz and politicians employ consultants to help them employ techniques honed in the world of entertainment. The diminutive pop star, whose song “Alejandro” is currently dominating summer playlists, is known for her outrageous sense of fashion. Let’s hope that our legislative officials, in their zeal to capture our attention, forgo the temptation to emulate the good lady’s habit of performing sans culottes.
Bernie McSherry is senior vice president for strategic initiatives at Cuttone & Company.