Weak bond or not, doesn't seem to matter. This market only knows one direction, UP! Traditional wisdom would tell you that when you have a weak dollar, rising interest rates, and rising energy prices, that asset prices should deteriorate. But, new wisdom, in the current environment, says that stock prices should go up. A sinking dollar means that repatriation of US$ by large multinationals increases profits, rising energy prices mean that the oil stocks can go up, and we no longer believe in CAPM or NPV analysis. Therefore, all the ingredients mean a higher market.
Since much of our economy has made a transition to a service economy, energy prices no longer mean as much. And, so long as productivity gains exceed wage pressures, fear of inflation is mute.
I now have a difficult time ascertaining what it will take to cause this market to correct. |
