Oh, it was a great day yesterday. We can breathe a sigh of relief because the S&P 500 hit its pre-Lehman bankruptcy level. Lehman Brothers filed for Chapter 11 on September 15th, 2007 and the S&P 500 high that day was 1250.92. Yesterday, the S&P 500 closed at 1254.60.
This level, as the market plummeted to its ultimate bear market low of 666 in 2009, was highlighted by many analysts as the launching point of fear. And although the price has now fully recovered, the fear in the system is still very much present. Ned Davis Research published a study of the Conference Board Consumer Confidence Index in their 2011 Outlook which shows that extreme pessimism still exists. Unemployment is still very high at 9.8%, necessities of life are inflating as income stagnates, housing is still searching for a bottom, and of course confidence has not returned. This is the most distrusted bull market for a reason.
But this leaves many questions about the future. Is the degree of pessimism warranted? Is this bull market built on smoke and mirrors which disintegrates when the liquidity is removed from the market? Or does Main Street pessimism even matter? Has the market discounted decent growth in 2011 which ignites a virtuous cycle? This is only the tip of the tip of the iceberg but a good place to start as we approach the New Year. Here’s to the Ghost of Portfolio Future.