Kass: Don't Buy the Rally

This blog post originally appeared on RealMoney Silver on Feb. 10 at 7:33 a.m. EST.

Optimism is growing as the rally in equities has broadened over the past few weeks. Many market sectors, including agriculture, materials, commodities and energy, have demonstrated price resilience and even breakouts in certain cases. At the same time, rising interest rates, improving credit spreads and a steepening yield curve are among the signs interpreted by some that a nascent rise in the economy is imminent.

As I expressed last night on CNBC's "The Kudlow Report," one can see the clarity of the business cycle far easier than seeing the clarity of the stock market cycle.

The business cycle remains weak and uncertain, and the likelihood of a second-half domestic economic recovery seems unlikely. There will be no magic bullet, either from President Obama's stimulus package or from Treasury Secretary Tim Geithner's new financial rescue plan.

Over the next 24 hours, the stimulus package and the financial rescue plan will be sliced and diced and interpreted by many. Though a "shock and awe" policy is arguably a necessary reagent to economic stabilization, what ails our financial system (and has contributed to the associated damage that has been incurred) has been broad in scope and has run deep geographically as the paradigm of decoupling proved to be another fairy tale.

A shot in the arm might have temporarily worked for the New York Yankees' Alex Rodriguez, but it will not work for the world's economies, credit system, financial and capital markets.