Courtesy of Barron's, a few thoughts on what can only be called the melt-up going on in stock markets all over the world.
Deals galore, reserves-rich central banks desirous to diversify into stocks and petrodollars aplenty have produced a fast-accelerating market while the U.S. economy is fast-decelerating. Says one market strategist: "This is now a trading market, where momentum and trend dominate, increasingly detached from the decaying domestic fundamentals."
The appetite for stocks is concentrated on S&P 500 big-caps, whose earnings for Q1 2007 are around 8% as compared to a U.S. economy that grew at a paltry 1.3% annualized during the same period.
Barron's position (a technically sound one) is that this melt-up can end only after the public has gotten involved. In other words, there is still a long way to go because if and when the public (still bearish historically and compared to the institutions) does get enthusiastic about this market, we'll need to call this something even stronger and more explosive than a melt-up.