Spring 2010 Market Commentary

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“What goes down, must certainly come up…”

…when you are coming out of a financial panic that is.  Many sit in awe of the nearly 75% gain in the S&P 500 from the March 9, 2009 lows.   The positive effects of tremendous amounts of cash returning to duty in the economy, actuation of pent-up corporate and consumer demand and an incrementally improving environment will likely serve as turbo boosts to an already rapidly advancing recovery.  I have great confidence that we will continue to speed along the road to economic prosperity.  However, uneven road conditions are likely.  Speed Bumps of the likes of rising interest and mortgage rates, a “fits and starts” recovery in home prices, and rising costs of materials and eventually goods will likely jar our senses when we hit them.  we are sure to face a meaningful correction or two along the way.  Throw in the occasional pothole from an unexpected geopolitical event and the road may seem quite rough.  But the car is gassed up and ready to go.  Will you come along for the ride or stay at home  I guess your decision will depend on your PIERspective.

There is no doubt that the next phase of the recovery will be met with some challenges.  Here are just a handful:

1) End of Housing Stimulus

2) We are running record deficits

3) Material costs and demand for oil is rising

4) Social Security, Healthcare and Debt Costs rising

5) Upward pressure on mortgages zapping affordability in the housing recovery

That all said, over the next few years, we suspect that these potential negatives may prove to be nothing more than speed bumps along the road of a great boom in domestic and global equity prices.  Here are some meaningful reasons to be bullish:

1) Stocks are cheap!

2) Corporations are holding 25% of assets in CASH and have yet to reinvest into their growth.

3) Autos, Housing and the Consumer (discretionary spending) have yet to join the party and when they do the economy will have a few more cylinders firing.

4) The recovery, financed completely with cash, will assist a healthy rebound in the use of credit which will act as a multiplier on economic activity.

CLICK here to read our full PIERSPECTIVE

Jim Scheinberg

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