Thursday, April 16, 2009
I last posted on this subject December 22nd. Here's an update on one of the charts I included in that post: the ratio of the VIX index to the yield on 10-year Treasuries. It's fallen by about 50%. Instead of signaling unbelievably dire conditions, as it was last November, it is now saying that we are just about getting down to the conditions that have prevailed during the worst of recent recessions. The market is effectively saying that instead of staring a record-breaking depression in the face, we are now looking at one of the worst recessions in recent times. That just about summarizes how I see the recent rally: it's not that things have turned positive, it's that things are not turning out to be so awfully horrible as people had been expecting. If the economy actually does take a turn for the better, there is a tremendous amount of upside left in this market.
Posted by Scott Grannis at 1:17 PM