- what needs to go right; and
- retail weakness.
Six Themes to Watch Posted at 12:56 p.m. EDT on Friday, June 7 So what has to go right to maintain the momentum that started midday yesterday with that amazing reversal? What has to go right to prove that was indeed a "whoosh bottom" (as the late, fabulous Mark Haines called it), where everybody who needed to sell has sold and buyers are at last attracted to the market? First, we need interest rates to stabilize, or to go up at a slower level, as the economy recovers. The employment report this morning was slightly better than expected, which could provoke a gentle rise in rates. Ideally, we want them back down, which is something that's hard to get if the economy is improving. But secondarily, we want the velocity of the move to abate. You can't have a rapid surge in rates without havoc occurring throughout the system, which is exactly what happened in the last month, when rates exploded higher even as they remain historically low.
You want to see us go back to new highs? Then we need to get interest rates back to where mortgages are below 4% so sidelined potential homebuyers can say, "Thank heavens, I didn't miss the bottom and I have to move now or I will never get another chance like this to buy." That would put us back on course for a prolonged housing recovery and all that goes with it. Still, though, just a cessation of the huge jump higher could do the trick. Second, we have been getting some better-than-expected data from Europe. That's shocking in itself, but it confirms that not only has Europe bottomed, but it might also be showing actual improvement. So many of our companies have huge businesses overseas, and this would be a godsend for them.