Week Ahead: Market Still Doubts Rally

Stocks are nearly 70 percent higher than when they hit their trough this time last year, and the street is as divided as ever about whether the rally will endure. One clear consensus, though, is that any market advance will be more discriminating, and it will be more important to pick individual stocks and sectors that could outperform the stock market as a whole.

“There’s a lot of people who think we’ve come too far too fast, arguably 70 percent off our lows is a lot.”

Art Hogan


In the week ahead, there are a few important economic reports, including February’s retail sales and of course, weekly jobless claims. Greece and sovereign debt issues stay center stage as Greek Prime Minister George Papandreou visits Washington early in the week, and investors continue to watch to see what steps European governments will be willing to take to help Greece with its debt situation.

Another big event will be the Treasury’s auction of more than $200 billion in t-bills, notes and bonds this week.

“There’s a lot of people who think we’ve come too far too fast, arguably 70 percent off our lows is a lot,” Art Hogan, managing director at Jefferies says according to CNBC.

“I think that argument fails in the harsh light of reality. Those levels that we were at March 9 really represented a credible possibility that a lot of companies were going to go out of business. We were putting in bankruptcy valuations for a lot of stocks.”

Some of those stocks were in the financial sector, which rebounded 144 percent since last March. Bank of America, for instance, is 345 percent higher than a year ago.

Both bulls and bears point to the fiscal and monetary stimulus being applied by Washington as a key factor behind the market’s run.

But where they split is on how well the economy is recovering and whether it can avoid swooning in a “double dip.”

Art Hogan

“The important thing to think about is this is a market now that a year later has basically been stuck for 60 or 80 days in the same position. We’re literally where we started the year…We’ve spent three months in the same place…I think that’s okay that we’re passing some time at certain level, but what’s happening is there’s a real tug of war,” Hogan says.

The battle is between investors who believe stronger earnings can drive stocks higher and “those people who think we’ve come too far too fast, believe we could have a double dip and those that are worked up about things outside the United States, like the risk from sovereign debt,” Hogan points out.

Hogan adds that he sees the market heading higher for now, but he sees a correction coming, possibly later in the year:

“I think it’s not going to be a straight line. There’s going to be other things we don’t know about. Nobody knew about sovereign debt. Nobody knew the term PIIGS a couple months ago.”

“The important thing to think about is this is a market now that a year later has basically been stuck for 60 or 80 days in the same position. We’re literally where we started the year…We’ve spent three months in the same place…I think that’s okay that we’re passing some time at certain level, but what’s happening is there’s a real tug of war,” Hogan said.

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