Thursday, January 17, 2013

Wall Street behind the eight ball

As we survey the myriad news headlines concerning the global economy, one would be hard pressed to come up with a bullish case for stocks in the first quarter of 2013.  Yet the same thing could have been said in 2012.  Indeed, an investor might reasonably ask, “Why, with all of the international, economic, governmental and corporate concerns, did the major averages produce stellar returns, though with a lot of volatility?” 

I believe Art Huprich of Raymond James nailed it on the head when he answered, “performance anxiety.” 

As with 2013, stocks opened last year sharply higher, which put many money managers behind the proverbial eight ball.  In order to catch up to the market they were forced to put sidelined money to work.  This year opened in similar fashion and already money managers have been feverishly buying stocks in the hopes of boosting their quarterly performance.  Performance anxiety can ignore a multitude of economic – even corporate earnings– sins.  This is one reason why I don’t think we should underestimate the market’s near term potential. 

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