Monday, November 16, 2009

Market Update - Will The Bull Keep Up?

LARGE CAPS BACK

The stock market's huge rally since March was initially led by smaller stocks, because small caps were hit the hardest on the way down. But small caps aren't looking that cheap anymore, and in October, the Russell 2000 index of small-capitalization stocks sank 6.9%, snapping a seven-month winning streak, while the Dow closed at its highest level in 2009.

CAN THE BULL OF 2009 LAST?

Since March, the Dow has jumped 57% and the S&P 500 has gained 62%, but there is a problem. What will the markets do when the very thing that has boosted the market dries up? The U.S. government has spent nearly $1 trillion to stimulate the economy and the Federal Reserve has maintained a policy of keeping interest rates near zero. Those will disappear as the economy's health improves, potentially halting the bull market by taking away what has been its crutch...cheap and plentiful money.

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