Market Imbalances

Market Imbalances

By Greg Nosar

We have seen a tremendous run in the market since March 9, 2009. Many stocks are up over 100% from their lows, the S&P 500 has rebounded nicely. I am however concerned of the over enthusiasm in the recent rally. Looking at indicators that existed in the market before and during the downturn, gold at $1000 an oz, oil at all time highs, bond yields at low, yield curve flat. We see these same indicators today, however the market keeps rallying. The market has been fed by quantitative easing, “better than expected” earnings, which are still off 50-60% from 2007-2008. Jobs are still in negative figures. Market is trading at 20x earnings, these factors have me concerned that the market will give back a lot of it’s gains.

What I am looking at the most is the disconnect of the low treasury yields, today we hit a 3.28% yield on the 10yr, and yet the market is up near Dow 10,000. Somebody is wrong, fixed income or equities, time will tell to see who is right.