SI's Consensus Watch Blog

CONSENSUS SENTIMENT: NEGATIVE (Bull Market Indicator)

As I was thumbing through the financial pages at the start of the week, these type of headlines started jumping out:

“Bernanke Spooks Investors With Market Outlook”

“Pimco’s Gross: Rate Cut Coming, But Not In October”

“Paulson: Housing Remains Drag on Economy, Markets”

“Hovnanian: Housing Slump to Last Another Year”

“Wells Fargo, Other Banks’ Earnings Hit By Housing”

Consensus Watch’s Take: Doesn’t exactly give you warm, fuzzy feelings. Despite all the prognostications of the return of Goldilocks in version 3.0, there are many red flags circling the global economy. You’d think that the Fed bailout would magically wave all the housing, credit, asset and trade imbalances to pixy dust, but there is still an underlying fear element that is permeating the landscape. What’s missing is a shock. We’ve had 2 shocks this year and I think we’ll see a third shock that will truly rattle the nerves of the market. They say everything comes in three’s. The Fed only has so much pixy dust in its bag so it’s a matter of time. The previous 2 shocks have created short term buying opportunities. I suspect the next shock will create similar buying opportunities but they will take longer to realize value.

AKR