It’s really not all that surprising that the market has managed to rally back to new highs in the face of Japan and Libya.
Stocks have incredible momentum, and neither crisis pose a clear or direct threat to the US. Besides, since the rally began late last September, every dip has represented a buying opportunity.
All that being said, a new “threat” emerged this week, and that is the hawkish turn by the Fed and the rally in the dollar.
Given how widespread the belief has been that this whole rally has been Fed-driven, you’d suspect that stocks would wobble a bit on this change in tune.
The fact that they haven’t is obviously a huge deal, as the Fed prepares to take the training wheels off the economy sometime this summer. Maybe the market can go higher still.
All that being said, if the US really is Japan 2.0, then the turns really will conspire directly with changes in policy.