Market's Still Purposefully Positive

A quick stock-taking here of the U.S. stock market: It has bounced back impressively from the nosedive triggered by the spasm in Chinese shares in late February. Fully 80% of NYSE-traded issues now lie above their 200-day moving averages, reflecting a persistent and broadly based rally. The market has advanced across a broad front since it began its recovery from the tech- and telco-bubble collapse and the narrowly based boom that preceded it.

Large-caps have outpaced small-caps in recent weeks, and growth stocks have likewise topped value. In each of these cases, it appears that investors have circled back, border-collie fashion, to collect the laggards and restore a more orderly formation.

And the Chicago Board Options Exchange VIX and VXN measures of expected volatility, based on the S&P 500 and Nasdaq 100, respectively, have moved back toward the resting pulse rates that were obtained prior to the scare from China.

I wrote at the time of that selling storm that I could not understand why our market should be following China's. Sometimes when you just don't get it, it's because there's nothing there to get. I love it when that happens.

The rebound from that late-February spasm has had a quality that I will describe as purposeful: It is almost as if the market has recognized its mistake and resolved to mend its ways.

I only recently became aware of a phrase -- "a will to displeasure" -- that has been percolating just below the level of my consciousness for several months. I don't know where it comes from, and Google didn't help. It works quite nicely, though, to describe the mood that has infected the macro view for some time.

In the past year, risk sensitivity has swung from "it's too hot and the Fed will have to fight it" to "it's growing cold and it's been a long time since the last recession." We've had Goldilocks encircled, but we haven't had the good manners to say hello.

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Jim Griffin is economic consultant and portfolio adviser to ING Investment Management and its Hartford-based unit, ING Aeltus, which manages institutional investment accounts and acts as adviser to the ING Mutual Funds. His commentary on the financial markets is based upon information thought to be reliable and is not meant as investment advice. While Griffin cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.