Another week, another rally. How long can this go on? I fear awhile longer. No money manager worth his salt can afford to be left behind. Every tick higher creates the fear of being left behind.
But why did the bull start running? Common wisdom says it was the fact that the uncertainty over the election was over and oil prices started coming down. This is more than a relief rally, and oil in the high forties is not something to go topsy turvy over. Indeed, I believe it was the election result, and the President's comments at his first press conference,that kicked off the vigours buying. Over the last couple of years, Bush has been very good for the markets.His policies have benefitted Wall Street over Main Street for quite some time. That is not meant to be a political statement, but rather and economic one. His tax cuts benefitted the wealthy to a much greater extent than the middle class, so did the changes in the estate taxes, and dividend
rules. Corporate profits as a percentage of GDP have rarely been higher. We've just come off four consecutive quarters of 20% plus profit growth. Corporate America has been a big beneficiary of the defense spending as we all know. Job growth has been sub par as well as the growth in wages. His second term, according to his outline, seems like more of the same, and thats great for Wall Street. Tort reform, which many believe will be his first prioity, will greatly benefit corporate profits, by limiting individual awards, at least over the short run. Health care reform, which attempts to shift more of the responsibilty for health care to the individual, to help create an ownership society, will help corporate america as well, as they will assume a larger role as government assumes a smaller one. Finally, social security reform, a partial privitization of the system, allowing for more investment into the market, I think speaks for itself. The Republicans increased their majority in both houses of Congress, so the likelihood that some of this stuff is going to happen has increased. That is my insight into why the market is in such a fever over the last two weeks.
