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Current market behavior typical of bull beginnings

In this look at current market dynamics, Jon Markman does a good job of helping the reader understand why stocks started moving up even before there were signs of an economic turnaround, and why they have continued to do so. After beginning with a sad, but all too common, story about a friend's portfolio, he goes on to explain the current anguish of those who sold their stock holdings during the early 2009 plunge prior to the 30%+ rebound since then:

All those investors who sold heavily in February and March, when volume blasted to multiyear peaks and prices spiraled into the ground, now face the two most vexing investor maladies of them all: not the usual two-headed devil of fear and greed, but the fearsome pairing of regret and envy.

And oh, baby, is regret corrosive. Every day you see the market rise when you're out of stocks after taking a big loss eats at your mind like an acid. It burns at your psyche until you'll do anything to make it go away. And because there is only one thing that can make that happen — buying stocks on the rise — you can see why stocks have relentlessly jumped higher of late. Every little dip is met with buying, and every big dip is met with even more buying....

Strangely enough, veterans will tell you this is actually how most bull cycles start: in disbelief and rage. You might think bear markets end when the economy begins to improve in a pervasive way and big companies start to report better earnings. But that's a fantasy, a children's fable. Just as bear markets begin when everything is great, bull markets begin when everything stinks.

His take is consistent with my observations and experiences over the past 30 years. Key takeaway: "At this point, the key issue that all sides must recognize is that the U.S. government and Federal Reserve have declared war on depression and will do what it takes to win [emphasis added].

Update: FYI, the market was off just -0.6% year-to-date through April. This after being down more than 24% at the March low. The preliminary report on Upgrading through April is for a year-to-date gain of +2.4%.

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