MONDAY DECEMBER 28, 2009

Climbing the Wall of Worry

As the stock market continues to rally into the end of the year, questions continue to be raised about the sustainability of the economy and the markets.  It seems there is no shortage of differences of opinion, even at the White House.  On one of Sunday's political talk shows, Larry Summers, President of the National Economic Council, stated confidently that the recession was over!  Great news.  However, over on another channel, Christina Romer, Chair of the Council of Economic Advisors, stated it wasn't and potentially more stimulus was needed.  Confused, apparently the White House is as well!

I continue to believe that the equity markets will grudgingly improve through the first half of 2010.  The depths of despair was so severe that the recovery, as strong as it has been, still has plenty of room to go just to get back to pre-Lehman levels.  The watch word for the new year will be sustainability.

There is no doubt that the equity market will continue to face headwinds, and those winds may increase as the year progresses.  Clearly, interest rates won't be going lower in the near future and are likely to rise if the economy stays on its current track. Also, at some point, the massive government stimulus will need to fade as well, perhaps sooner than the White House wishes if the political calls for fiscal restraint take hold.  And of course, the world is still a dangerous place, as the near-miss Christmas Eve terrorist event over Detroit and this weekend's violence in Iran vividly demonstrate.

They say Wall Street "climbs a wall of worry."  Well, there will certainly be much to worry about in 2010. 

POSTED AT 1899-12-30 12:00:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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