Despite a rally on Friday, the benchmark indexes finished the week in the red. The Dow Jones Industrial Average (chart) fell 0.88%, the Nasdaq (chart) -0.22%, the S&P 500 (chart) -0.50% and the Russell 2000 (chart) -1.31%. The market action this week broke a six week stretch of gains.
What helped fuel the market on Friday was Ben Bernanke’s comment in a letter that the Fed has more room to add yet even more stimulus if the economy needs it. Is it me or are we all a little exhausted by the same regurgitation of the Fed coming to the rescue of the economy and the markets? What’s clear is investors are are seemingly and exclusively looking to invest in stocks and bonds based on what the central banks will or will not do. To me this platform has now become overkill and I am going to be very cautious on the long side of things going forward. That said, if you have been short the market based on economic and corporate fundamentals, theoretically you have been on the right side of the trade, however, chances are your short thesis has hurt your portfolio because of the accommodative banking policies from around the world.
In my humble opinion this cannot go on forever and I certainly do not want to be long the market when the policymakers say “that’s enough!” Good luck to all.
Have a great weekend 🙂