State of the Stock Market Analysis for the Week Ending February 21st, 2015 (Stock Market Impresses the Pessimists 02-21-2015)
It was one of those weeks where a lot of things could have gone wrong, but somehow, some way, many of the “wild cards” remained calm and cool, and nothing actually went wrong. The big positive of this past week was seeing the Dow and the S&P 500 hit all-time highs on Friday. Likewise, seeing the Nasdaq rise to a fresh, 15-year high was also impressive, and it was a great way for the bulls to close out what had been a tough week. All-time highs are still always all-time highs, and despite a boatload of financial headwinds, the stock market ducked its head, moved forward and impressed even the most pessimistic.
The Greek situation was again center stage this week, and it looks as though some sort of four-month extension or resolution was pushed through at the last minute. That helped U.S. stocks rally to new highs on Friday, and the Greek news again confirmed that the EU will do anything and everything to avoid any sort of crisis for the EU. Greek Finance Minister Varoufakis is still playing hardball for the Greeks, so even if we did see a “resolution” this week, we can count on Greece to keep challenging the ECB and the EU in the months ahead.
A Greek compromise was a calming development, though, and it sets the stage for more bullish action next week, as global financial markets breathe a big sigh of relief. The “Powers That Be” in the EU know that a Greek exit from the euro (and the EU) would be devastating. It could set in motion a “domino effect” that could cause unrest in the PIIGS, and that is not exactly what the EU wants to deal with for the time being. Spain is a huge EU player, and the last thing the EU wants right now is for Spain to turn into the “next Greece.”
You have to hand it to the Greeks, though, because after many years of forced austerity and condemnation, they are fighting back a bit. They elected an aggressive, anti-EU government party that is willing to take a stand against the EU. This is quite brave, especially considering the strength of the EU and the ECB. Maybe this tough stance by the Greeks will ultimately be healthy for this “experiment” known as the European Union, and maybe all will work out well. It is too early to tell, though, so we will just have to wait to see how these challenging times unfold.
On the U.S. home front, there is nothing more encouraging than record highs for the major indices. Economic news needs to remain strong in the weeks ahead, as do earnings, but as long as we can continue to see positives, then the upside lift in the stock market should continue. We do get Janet Yellen sitting before House and Senate leaders next week, so the pressure is on Yellen to defend the zero interest rates and QE-to-the-moon of the last few years. She will likely do a great job, but some hard-hitting questions from lawmakers might be a plus.
As for this buoyant stock market that simply refuses to pullback or rollover, we can only hope for the best. At six years old, this is an aging bull market that had the backing of the Fed, the Treasury, the ECB, and global politicians. If any of this backing were to change, it could be trouble. Likewise, if interest rates head higher or are raised, then that could be trouble too. But we are now at stock market highs, and as expected, the bulls are not complaining. This is a challenging year so far, so we can expect more challenges as we move toward spring.
That said, the Gorilla wishes each and all a relaxing weekend. It has been pretty tough on our East Coast crowd, so stay warm and we will be back in action on Monday. Enjoy the weekend, and enjoy the all-time high stock prices. Let’s hope more upside is in store for all of us.
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