Stocks: Suspiciously Quiet Out There

News Brief from AXA Equitable: Highlights from recent notable market news reports
January 27, 2012

The new year is off to an eerily quiet start, so Barry Knapp of Barclays Capital fears that the absence of the volatility that characterized much of the 2011 second half is just the “eye of the storm” (“All’s Quiet on the Dow. Too Quiet?” by Jonathan Cheng, Jan. 24, 2012, The Wall Street Journal).

The market’s expectation for volatility to continue hasn’t been fulfilled. As a result, “We are antsy,” Dennis Gartman wrote in his recent newsletter, according to The Journal. The source of his anxiety is similarities to April 2011 when, as is now the case, investors had become optimistic about a U.S. recovery and less worried about the Eurozone. Soon after, volatility surged through the second half.

Not surprisingly, world leaders gathering recently for the annual World Economic Forum in Davos, Switzerland, fretted about Europe (“Shadow Over Growth,” by Stephen Fidler, Jan. 25, 2012, The Wall Street Journal).

“I’d be cautiously optimistic about the world economy if the driver was the U.S. economy,” Simon Johnson, a former chief economist at the International Monetary Fund, told The Journal. “But it’s not. Europe is the big question.”

Barton Biggs of Traxis remains bullish on stocks despite Europe’s debt crisis (“Biggs Cites ‘Strong Rally’ Potential for Stocks,” by Nikolaj Gammeltoft and Deirdre Bolton, Jan. 23, 2012, Bloomberg).

“I’m terrified I’m not long enough if we’re going to have a strong rally here, which we could,” he told Bloomberg, though conceding “I’m terrified I’m too long if the apocalypse is coming in Europe.”

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