Have the Financial Markets Turned Up?

A brief post.  Last week financial markets saw wild, wild swings, triggering widespread panic and a lot of traffic to the What My Intuition Tells Me Now Blog.  In the midst of all of the noise I posted a, “Brief Update About Mood of the Financial Markets.”  In that post I stated:

“Before I make some sort of call as to a market low being reached I want to feel a sense of confidence in buyers, as opposed to elation.  I also want to feel that those who were queasy have taken their investment expectations and monies elsewhere.”

Where are we now?  The last three market trading days have seen gains that have erased the drastic drops of last week.  My current sense of things is that the majority of investors no longer feel queasy.  Instead there is a sense of growing elation.  I really don’t feel much confidence.

Throughout the turbulence of the last six weeks I have remained invested.  I still am a believer in U.S. equities as businesses are running lean and mean.  That is, the expense structures are minimal, and revenues are growing slowly.  That is a combination that generates profits.  Furthermore, it seems as if U.S. businesses are finally hiring more.

And here is the potentially counter-intuitive thing.  Now that the U.S. financial markets have absolutely gone through an acid test this year, they may finally be out of the woods.

First we had the Middle Eastern revolutions cascading throughout the late winter and early spring.  Then there was the earthquake and nuclear crisis in the world’s third largest economy, Japan.  Then the European debt crisis.  Then the U.S. debt crisis.  Then the U.S. credit downgrade.  This is pretty close to a perfect storm for financial markets.

Yet, during the entire sequence of crisis the economies of the first world never dipped into recession.  What’s more, the U.S. economy continues to log steady, if unspectacular, growth.

If the series of events I listed above did not dislodge nervous investors from equities, what series of events would?  In other words, the investors currently holding equities are those who want to hold equities.  That means that it is highly unlikely that we see big market drops like we saw last week again anytime soon.

Jason