The covers of widely circulated newspapers and business news publications are famously known for being contrarian indicators of what will actually happen in the economy and financial markets. The most notorious case of this was BusinessWeek’s 1971 cover story “The Death of Equities.” More recently, the Financial Times similarly questioned “The Death of Equities?“The latest contribution to famous covers comes from Barron’s Vito Racanelli who wrote the latest cover story titled “Tough as Teflon” regarding the stock markets relentless bullish run.
He reviews both the bullish and bearish arguments that are out there:
Wall Street’s bullish strategists say the summer rally is evidence of the market’s fortitude in the face of well-known concerns. After the presidential and congressional elections are decided in early November, they argue, Washington’s heretofore warring parties are likely to reach some sort of agreement on how to forestall fiscal Armageddon by raising some taxes and paring some mandated cuts. As for Europe’s troubles, they argue, investors have grown accustomed to living with the uncertainty overseas.
Not so fast, the bears reply, pointing to stocks’ swoon in May, and a rout last August when Congress struggled to reach agreement about raising the U.S. debt ceiling. All it would take, they say, is one serious setback, particularly a failure to legislate an end to the fiscal cliff or a banking crisis in Europe, to send the market reeling by year end.
Despite longer-term uncertainties, Racanelli’s piece maintains a pretty bullish tone at least for the near-term.
Timing is everything in market calls, along with price. Hence, this caveat from both our bulls and bears: With the elections looming and potentially critical policy changes to come, their forecasts won’t play out until the end of 2012, and probably not before the polls close on Nov. 6. That could mean more time for the Teflon bull to strut his stuff, and for Mr. Market to disregard bad news.
Racanelli’s full feature goes into each of the key risks and it includes discussions with Wall Street’s top strategists. Read the whole thing at Barrons.com.
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