"How I Learned to Stop Worrying and Love the Rally – stocks sprinted higher this week, extending the very impressive rally and leaving most major global indices sitting at multi-year highs. The big catalyst behind the move was the Fed but Bernanke really as just one piece of a continuum of events that have contributed to the very strong price action. Keep in mind the S&P had ripped 100 pts even before the Fed on Thurs, largely b/c of the impressive policy measures adopted in Europe (Bernanke arguably is just throwing fuel on an already large fire).
Stepping back, the big tectonic drivers of this rally remain in place – falling tail risks (including and especially the ones in Europe), massive CB liquidity, improving US housing, and expanding multiples. That is it. All the other “negatives” aren’t irrelevant but they can’t compete (for now) with those other positive forces (this is why the warnings from FDX/INTC, the Libya events, surging crude, poor non-housing eco #s, sluggish China, etc, are being ignored).
Sentiment is still a little weird – increasingly there is an expectation that stock prices will continue rallying but only b/c of central bank manipulation (so the average investor isn’t wildly bullish on fundamentals necessarily but acknowledges the power of central bank liquidity). - Alessandro P. Garbuio JP Morgan Prime