From the CBOE put-call index to the VIX to sentiment indicators, extreme investor pessimism on equities seems widespread. Redemptions from mutual funds and institutional cash ratios have skyrocketed, Wall Street analyst expectations have spiraled down. Yet the world economy is nowhere near in as bleak a shape as the equities market suggest. The Federal Reserve Board is not going to let the US economy slide into recession without easing the cost of credit even lower. The US Senate is going to propose a front loaded tax cut package that will provide additional fiscal stimulus.
Inflation is no threat to global growth, nor are oil prices, which are headed lower.
GE's strong report suggests that the profit recession is on Nasdaq, not a general global corporate phenomenon. Central bankers in Europe and Japan have no option but to ease interest rates. All the above suggest that we have seen the worst of this bear market. Still, stock picking and sophisticated risk management is critical to avoid getting ensured in the earnings minefields that still abound on Nasdaq. Citicorp, last recommended as a buy here at 40-41 a fortnight ago, has almost achieved my initial price target of 48.