Time to Reassess if Stocks Can Gain More --- After a Big Run, Market Appears Vulnerable; Despite Happy News, Consumer Spending Lags Behind
As investors return from the Labor Day weekend, they are preoccupied with one big worry: whether the enormous stock rally of the past six months can continue.</br></br>The days after Labor Day historically are a time to reassess and evaluate. The bottom line is that after a series of positive surprises in economic and corporate reports has pushed the Dow Jones Industrial Average up 44% since March 9, the stock market remains on precarious footing.</br></br>As long as the happy news keeps coming, the gains can continue. But the more good news investors get, the harder it is to surprise them, and the bigger the risk that some lurking disappointment could spoil the party.</br></br>"World economies are no longer 'on the brink of an abyss' and economic growth seems within reach," says Gordon Fowler, chief investment officer at Philadelphia money-management firm Glenmede Trust, in a report to clients. But consumers and government need to reduce their substantial debts, and that "has the potential to derail the pleasant uptrend."</br></br>The good news is that a whole series of items that appeared poised for disaster six months ago seem now to be getting steadily better.