Tags: roche | stock | rally | fizzle

Roche: Rally Will Fizzle Out Soon

By    |   Tuesday, 07 Apr 2009 10:18 AM

David Roche, global strategist for Independent Strategy, says the stock market rally will soon fade away.

While the Standard & Poor’s 500 Index has surged 23 percent from its March 6 low, “I think the rally will peter out when negative factors come out,” Roche tells CNBC. That will be “mainly through the economy not recovering as the market anticipates.”

The market is now discounting weak earnings, especially from banks, viewing that as old history, Roche says.

The thinking now is that “the economy is set to recover,” he explains.

“I think the disappointment will come when we see the economy doesn’t really recover.”

And why won’t it recover? “First, the credit machine is still broken, and credit will contract. Therefore the consumer and investment are out of the game,” Roche says.

“Second, even if they had credit to grow, you have the consumer and businesses deleveraging,” rather than looking to take on debt.

Roche isn’t too impressed with government policy to stanch the recession.

“Ninety percent of what the U.S. government has done is to try to add leverage to the government balance sheet to support an unsustainable level of leverage in household balance sheets,” he says.

With deleveraging already underway, that just won’t work, Roche argues.

He’s not the only one who sees the stock rally petering out.

"You have some skittishness in the market," Len Blum, managing director at Westwood Capital, tells the Associated Press.

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David Roche, global strategist for Independent Strategy, says the stock market rally will soon fade away.While the Standard & Poor’s 500 Index has surged 23 percent from its March 6 low, “I think the rally will peter out when negative factors come out,” Roche tells CNBC....
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Tuesday, 07 Apr 2009 10:18 AM
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