Is the Great Bear Market of 2011 Over?

Is the great bear market of 2011 over? Stocks have risen relentlessly this month culminating with a giant 3% move last Thursday. The plan revealed that day to address the European debt crisis is the most often cited reason for the rally but the resilient performance of the US economy, as evidenced by the GDP report the same day, also played a prominent role. Unfortunately, both of the “reasons” for the rally leave a lot to be desired. The debt plan produced by Europe’s politicians, long on rhetoric and short on details, has already failed if the purpose was to soothe bond investors nerves. Italy’s bond auction Friday did not go well and China indicated over the weekend they are not prepared to buy more bonds from the EFSF until further details of the fund are worked out. Meanwhile, the US economy may have managed to skirt a return to recession – the verdict is still out on that front – but it is far from healthy.