What seems clear, however, is that with the steep losses in the stock market in recent quarters, the utterly dismal long-term return prospects that have weighed this market down for the past 12 years are largely behind us (the S&P 500 has turned in a total return of just 3.4% annually over that period).
Valuations are improved, but there is an overhang of continuing economic difficulty that will probably require more writedowns, restructurings, and displacements. I expect that process to grind along, but with an ebb-and-flow of both positive and negative surprises. It is hard to expect stocks to launch into a sustained bull market anytime soon (we should rule out neither a sharp short squeeze nor a retest of last year's lows), but improved valuations, coupled with a retreat in credit spreads, suggest that we may not require white-knuckle, fully-hedged investment positions for a while.
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Valuations are improved, but there is an overhang of continuing economic difficulty that will probably require more writedowns, restructurings, and displacements. I expect that process to grind along, but with an ebb-and-flow of both positive and negative surprises. It is hard to expect stocks to launch into a sustained bull market anytime soon (we should rule out neither a sharp short squeeze nor a retest of last year's lows), but improved valuations, coupled with a retreat in credit spreads, suggest that we may not require white-knuckle, fully-hedged investment positions for a while.
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