Arlington Econometrics Market Commentary
du Pasquier Asset Management
January 12, 2009
du Pasquier Asset Management
Arlington Econometrics Market Commentary for the week of January 12, 2009
Only one Man.
Beware the Obama Bounce. The turn of the calendar’s page has prompted all sorts of conversation about how the market is due for a turnaround and why we’ve gotten quickly out of the gate in 2009. I don’t have a significant difference of opinion with others about either of those topics, but I am loathe to ascribe their meaning to one individual, or one event for that matter.
In the same way that we should not refer to a Greenspan rally, or a dot.com failure, or an Iranian oil recession, we must bear in mind that the market is a marvelous tapestry of interrelated events whose confluences lead to the initiation or termination of economic phases and cycles. No one event, or person, is responsible or should be given ascription for the market’s peculiar turns. In fact, certain immutable laws of quantitative analysis are devoid of “single event” purpose (or cause) and are generally thought to be consequences of generational, top-down, macro currents.
While it is true that corporate events might move stocks intraday, consider that the most recent secular equity cycle (1999-2008) resulted in net losses for equity averages worldwide. In other words, you can’t time the market, only go with the flow, and respect the existing cycle potential.
I am suspicious, then, of those who believe that energy replenishment and independence, bioscience and pharmaceutical discovery, electrical and industrial grid infrastructure, agriculture, war and peace, are uniquely Obama-driven market phenomena. In fact, I have written on these topics for more than twenty years. A unique confluence of opportunity has indeed presented itself today, embodied by a charismatic leader. But the life-cycle of cultural, fiscal, and economic norms transcends any one person.
Besides, the case might be made that these issues could be stymied by an intractable recession and a nervous public. We do not yet know which, if any, names will emerge from these historic times, any more so than we might have guessed about the acceleration/decline in tech stocks a decade ago. People are cautious with their money today. In spite of the will to invest, many have not the gumption.
If momentum were to grow in the next few months, it should come from the demand-side of the equation. After a dismal year in 2008, we put aside most theories about speculation and hypothesis. Instead, earnings performers and high-demand companies should lead the market’s early stage efforts to stabilize and rebound. Fundamentals are back, and never really left, anyway.
Most recent forecasts indicate a protracted recession worldwide. Right now, no continent is immune from cyclical downturns. As I wrote last week in my quarterly market analysis, these times are unique because of the congruence of global decline. Unlike the past, no region or country seems to have absolute immunity from withstanding these cycle devaluations.
The good news, though, is that a baseline equilibrium is being established from which these new rallies might be created. All together, this means that the panic should be short-lived, while the vacuum created by its occurrence is the petri dish of new growth opportunities for the next decade and beyond.
Scotty C. George
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