The pummeling that has infected every corner of the global equity market this year may or may not be near its end, but thoughts of brighter days are inspiring pundits and traders alike. It may be fleeting, of course, like so many rallies before it this year that soon faded. But for the moment, hope springs anew.
The reported stimulus behind the pop in foreign markets today is, well, the prospect of more stimulus. President-elect Obama worked the talk shows over the weekend, promising to spare no effort in propping up, bailing out and rebuilding once he takes up residence in the White House. Like-minded statements from governments around the world recently are helping nurture the idea that more stimulus efforts are coming.
It’s anyone’s guess if this is the catalyst to unleash a sustained rally. Certainly the global combination of enticing equity valuations, battered prices, cheap money and pledges of state spending are turning heads. Timing is always in doubt, but with so much red ink in stock markets everywhere, Mr. Market is now discounting a fair amount of pain, as our table below suggests.
The great unknown is the global economy in 2009. More to the point, are equities now sufficiently discounted for what awaits next year? Perhaps, although the answer will only arrive in daily doses. The future, in short, is still as unclear as ever, and perhaps a bit more than usual. Indeed, the recession in the U.S. is still in its early stages.