The Summer's Awesome Rally Was Based On Fundamentals

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The naysayers will point to today’s jobs number as evidence that the economy remains in the toilet. And when you combine that with things like the string of bank failures and the inability of companies to grow revenue (as opposed to just cutting costs), things still look pretty ugly.

But none of that proves that the market rally isn’t based on fundamentals. How come? It’s all about how far we’ve come.

Let’s remember where we were in March. The market wasn’t just pricing in a recession, or even a deep recession. The market was looking at all-out collapse. People were going crazy for gun stocks, ferchrissakes! Do you remember that? Other alternate indicators of sentiment, like the futures market on Intrade, showed a lot of people were pricing in out-and-out depression, with GDP contraction of 10% more. It hasn’t happened.

Sure, arguably the only thing that’s changed is perception, but perception is fundamentals, since the market participants try to look down the road.

Even if we just keep bouncing down the road at our current unimpressive rate, that’s still much better than the crisis situation we were looking at 6 months ago.

Of course, you can blame the moneypump or whatever else for the fact that our economy pulled back from the brink, but that hardly matters. And you can even say that a bigger crisis is coming down the road, though the burden of proof is on you, not the bulls.

But it’s good news: as this Summer comes to an end, the market rallies some more despite it being September, this has been a rally based on fundamentals.

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