Stocks reclaimed plenty of multi-year highs this week. The
Nasdaq touched levels not seen since 2000, and the Dow got back to its
pre-crisis December 2007 high. The market seemed to be cheering progress in
Europe and mostly shrugging off disappointing U.S. jobs data.
The cheers were not totally unfounded. Europe did make a
substantive step forward this week, and the jobs data--although
disappointing--was hardly a disaster. But the world economy is far from out of
the woods, and given how much stocks have run up, and how full valuations have
become, investors must continue to exercise caution and should be prepared for
a potential pullback.
Europe Ends Its Vacation. Europe made a real effort to bring its debt crisis under control this week. After promising to act last month, we finally got the concrete details of the European Central
Bank's plans to keep short-term borrowing rates reasonable
for some beleaguered eurozone members. And the details mostly lived up to
expectations. Unlike previous plans that seemed to be filled with hidden
landmines, the new outright monetary transaction plan looks like it can achieve
its goals. The rub is that the goals of this plan are modest compared with the
size of the eurozone crisis…..
Wait…they’re just getting started. Quick, turn to http://finance.yahoo.com/news/false-sense-security-110000283.html
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