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 If the Market Rallies, How Do We Make Money?The risk of a further market decline of significant size is high. Credit conditions have only become worse, and companies with near-term debt funding issues are experiencing stock declines at double-digit percentage rates daily. Even with Bank of America and Citigroup having received equity support from the Federal government, these two stocks look like they are repeating the Bear Stearns, Lehman Brothers and AIG experiences. If somehow, the debt markets unfreeze and private market capital begins to flow again, the rally will be enormous. Companies that have been taken down to single-digit earnings multiples with solid, long-term businesses will fly. And you’re going to want to be ready to trade this market as it begins to run. On the next page, we highlight 3 actions you should take to get prepared for a potential money making rally. |
Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
