Sign in
Become a MarketWatch member today
Howard Gold's No-Nonsense Investing
April 15, 2011, 12:01 a.m. EDT
View all Howard Gold's No-Nonsense Investing "º
"¹ Previous Column
China: making money in the world's biggest bear
First Take "º
Google on the spot to defend big spending
By Howard Gold
NEW YORK (MarketWatch) "” After two years of rallies and only one major correction, the global bull market may soon face its biggest test.
The impending end of the Federal Reserve's latest easy money program ("quantitative easing" or QE2), along with seasonal weakness in stock markets and other events, could cause investors to doubt this bull once again. Watch video "Experts Explain: What is Quantitative Easing?"
The potential turbulence could resolve the big question that has been hanging over the markets: Is a real, sustainable economic recovery driving stock prices higher or, as the bears claim, is it just an illusion pumped up by excess liquidity, especially from the U.S. government's printing press?
Walt Mossberg reviews the first tablet from Research in Motion, the BlackBerry PlayBook. It's also the first major iPad challenger that isn't based on Google's Android system.
Meanwhile, earnings season is upon us. The way stocks react to the good news we'll probably hear will tell us which way the market will go in the months ahead.
And some key technical indicators are at major resistance points. If they don't break through them, then we might want to follow Mark Hulbert's recent advice to "sell in April and go away" "” at least for a while. Read Mark Hulbert's column on getting a head start on summer weakness.
But let's look at the fundamentals first.
More than a year and a half after the official "end" of the 2007-2009 recession, the U.S. economy is recovering, albeit more slowly than usual. There were 216,000 new jobs in March "” the most recent of several encouraging employment reports "” and private-sector job growth in particular has picked up.
U.S. exports set a record in January, riding the demand from China and other emerging markets for manufactured goods and food. That has helped multinational companies in the Standard & Poor's 500 index /quotes/comstock/21z!i1:in\x (SPX 1,314.52, +0.11, +0.0084%) clock huge profit gains and hoard over $2 trillion in cash.
S&P 500 companies' earnings have topped analysts' estimates for seven straight quarters, and in the fourth quarter of 2010, more U.S. companies beat Wall Street's revenue growth forecasts than at any time in four years.
Companies are raising dividends again, stock buyback authorizations are up nearly 40% from last year, and the US initial public offering market is off to its best start in years.
All of these things, I believe, will support a better market as the year goes on. But first there are some hurdles to clear.
The biggest, of course, is the imminent conclusion of QE2. By the time the program winds down in June "” and it won't end early, that's for sure "” the central bank will have bought $600 billion in additional Treasury securities as part of its plan to support what looked like a much weaker economy last year.
I don't know if it's worked or not, but in the ensuing months measures of consumer and business confidence have risen. (They've slipped again, however, in the wake of the Libyan uprising and Japanese earthquake, tsunami and nuclear accident.)
Stock and commodity prices have soared, too, although I believe the impact of QE2 has been exaggerated here: The broad measure of the money supply, M2, has risen by only 2.4% this year, and the extra money the Fed has pumped in is only about 1% of global gross domestic product in 2010.
Investors disappointed by Google's earnings miss on Thursday pushed the stock to a six-month low as the search giant defended its heavy spending on new hires, investments.
5:56 p.m. April 14, 2011
"Moody's downgrades Ireland sovereign debt two notches to Baa3 from Baa1 http://on.mktw.net/h6BMWQ" 1:22 a.m. EDT, April 15, 2011 from MarketWatch
"China's first-quarter GDP rises 9.7%, consumer inflation at faster-than-expected 5.4% http://on.mktw.net/fYPSUJ" 9:04 p.m. EDT, April 14, 2011 from MarketWatch
"Coming up: Chinese economic growth, inflation data due out at 10 p.m. U.S. Eastern time http://on.mktw.net/fVOaFQ" 8:52 p.m. EDT, April 14, 2011 from MarketWatch
"Hong Kong stocks move sideways ahead of data; Angang Steel drops on profit warning http://on.mktw.net/eFoXu8" 8:34 p.m. EDT, April 14, 2011 from MarketWatch
"Gold futures hit new all-time high in early Asia trading http://on.mktw.net/iiFy7L" 7:34 p.m. EDT, April 14, 2011 from MarketWatch
Ethics Monitor
Investing in forests could save the world
Media Web
Is the next Silicon Valley at Annenberg?
Money and Power
Ryan and Obama health plans fail
No-Nonsense Investing
Global bull market may soon face biggest test
What Wall Street Won't Tell You
Beware small caps
Commodities Corner
What to do with gold and how to do it
Read Full Article »