The March rally in the stock market has people talking, and asking questions, such as: Was that a bottom?
For the moment, the answer is “yes.” Deciding if the answer holds is debatable. We’re skeptical largely because the rally this month has drawn power primarily from a new round of hope that Washington’s various experiments to right the economy will finally hit pay dirt. Perhaps, but it’s not the stuff that powers sustainable rallies, much less secular bull markets. We’re closer to that point than we were 3 months ago, of course. But uncertainty still dominates.
The latest chatter may put a floor on equity prices, and for the moment that’s what we’re looking for, although it’ll only be obvious in hindsight. Clearly, the government is integral in the healing process. But expecting the latest press release from the Treasury or the Fed to unleash something more substantial than a bounce is probably expecting too much at this point.
Nonetheless, it’s tempting to look at the trend in recent weeks and draw an optimistic conclusion. As the chart below shows, March has been kind to owners of equity. After taking another drubbing in February, investors were primed for anything that even remotely looked like good news.
And more of it appears to be coming in today’s news cycle. The latest from the Treasury is yet another freshly hatched plan to subsidize private purchases of the toxic securities that are weighing on the banking industry’s balance sheets. The size of the plan is a tidy $1 trillion, which is to say it’s sizable. Asian markets responded positively to the news and as we write the U.S. stock index futures are up ahead of the opening bell on Wall Street. It’s not over till it’s over, but with just over a week to go, it’s looking as if the S&P 500 may post a modest gain for this month…maybe.