Market Update
Relief Rally Is Underway
July 24, 2008
Over the past five days, the stock market has rallied from a deeply oversold position. The sparks for this rally were oil price weakness and better than expected quarterly results for many of the banks. Moreover, the market has subsequently shrugged off a variety of negative news items.
At the outset of July, we reflected concern about the timing of resolution of some of the negative factors, such as oil prices, affecting the market. Subsequently, the price of oil has declined from its high near $150 per barrel to about $126 per barrel. In the process of this decline, the uptrend in the price of oil for this year was broken, suggesting at least a near term top in the price of oil. Meanwhile, the dollar, which has been in a trading range since March, is strengthening a bit, helped perhaps by some backup in bond yields produced by reduction of the fear premium in the stock market. In turn, commodities and gold prices have weakened. All of these developments are positives for the equities markets because, at least for a while, the forces of price inflation are diminished.
While pleased with a more positive tone in the stock market, we continue to believe that more time will be required to work through the complex set of issues facing the market which we enumerated earlier this month. For the moment, we view the current market move as a relief rally until we can be more confident that the fundamentals appear sufficiently promising to permit a sustainable market move.
A. Marshall Acuff
Managing Director
Chair, Cary Street Partners Investment Committee
Cary Street Partners Investment Advisory LLC
