For a few days in the middle of the last week, it looked like the Dow Jones Industrial Average was going to hold on at the retest of its November lows around 7500. Then on Friday, the fears of the nationalization of Citigroup and/or Bank of America pushed the Dow to an 11 year low quite emphatically. By the end of the day, the White House had come out to support the private banking sector, and although stocks rallied (BAC went from -30%+ midday to only -3.5% by the close) we’re still sitting at a new low.
Around 1:30pm on Friday, I thought this was going to be it. I was looking for capitulation, and when the stampede of investors were jamming the doorway out of both Citi and Bank of America, it looked pretty much like the final capitulation. Stocks were in freefall.
I recently made my RRSP contributions for the 2008 fiscal year and haven’t made the leap into equities yet. There’s something to be said for long term investing, but when the Dow is at a (near) 11 year low, doesn’t that make you sit up and rethink that plan?
The stock markets are supposed to be a leading indicator to the health of the economy, about 4 to 6 months out. With that in mind, the predictions of a second half economic recovery are looking shakier than ever. Over the course of a year, that ‘recovery’ has been pushed out from late ’08 to 1H 09 to 2H ’09. Now I’m reading comments on the ‘recovery in 2010’. Wow.