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Have the Bears Been Sent Running?

U.S. stocks continue to show resiliency. A week after nearly touching official pullback territory (a decline of at least 5%), large-cap stocks have rebounded nicely. The NASDAQ index enjoyed its strongest weekly performance since February, while the S&P 500 index had its best weekly performance since April.

The bond market is performing well too. Yields on the 10-year Treasury note fell to 2.34% today, the lowest closing yield of the year. To put this number in perspective, the benchmark note started 2014 with a yield of 3.03%.

Mr. Market is causing those who have made bearish forecasts to seem silly, as investors who have maintained their allocations to stocks and bonds have done well. But, while the bears may have been sent running this week, they have not been banished. That’s actually a good thing, because when sentiment runs too hot (which, at least for stocks, it currently is not) downside risks intensify.

Enjoy this week’s good returns, but remember that market conditions can change quickly.

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