Market Analysis


"Crisis” has worked its way into our lexicon all too frequently in the recent past—so frequently that its meaning has been lost.

Story Highlights:

  • Since the financial panic's end last March, there's been almost one "crisis" per month.
  • Technically, a crisis is a turning point—for better or worse.
  • Given continuing global economic expansion, it's clear past and current "crises" aren't that.
  • Look past labels and toward strengthening fundamentals to see a truer reality.


Since the bear market bottom in March 2009, there have been seven "crises" by our count:

  • GM and Chrysler failing would drive mass unemployment and destroy US manufacturing.
  • Much ballyhooed US financial "stress test" results would show insolvency.
  • A weak US dollar combined with fears of foreign countries finding an alternative reserve currency signaled the end of the dollar as the world's reserve currency.
  • Unemployment approaching 10% sharply raised widespread fears of the death of US consumers.
  • Around Thanksgiving, Dubai debt concerns were of "crisis" proportions—default was widely discussed.
  • More recently, a Greek crisis spawned a PIIGS debt crisis—that further spawned a euro crisis.
  • And now, a Gulf oil spill crisis.

There may have been others, but those seem like the biggest—garnering the most media and investor attention.

But were any of these actually a crisis? To be completely nitpicky, defines crisis as "a stage in a sequence of events at which the trend of all future events, for better or worse, is determined; a turning point." Sure, pockets of the world are troubled—but each "crisis" has thus far failed to deliver the massive, dire consequences feared. The PIIGS fallout (or lack thereof, since they continue to have successful debt auctions and now have a massive bailout backstopping them) is still uncertain, but our guess is it has the same market implications as last summer's dollar fears (i.e., fleeting, then stocks march higher.)

Over the past few weeks, we've highlighted strong fundamentals underpinning this market recovery. Here are more. In our view, together, they simply outweigh the Gulf spill and Greece—just like they did with Dubai's "crisis.

  • US corporate profits increased 30% y/y—a rare and very bullish occurrence.
  • May 2010 US auto sales increased over 10%, the fifth month running, for the first time since 1984.
  • Bank profitability rose powerfully in Q1 2010.
  • The US dollar has strengthened lately, and recent Treasury auctions have been highly successful.
  • Jobs numbers, usually a lagging economic indicator, showed improvement Thursday: ADP's May payroll numbers increased +55,000, and's index of online job openings rose for a fourth consecutive month—logging a 14% y/y gain.
  • Following a robust March, April's US factory orders rose slightly less than estimated, but continued a nicely expansionary pace.
  • The ISM Non-Manufacturing Index was unchanged last month, remaining solidly expansionary with almost all components contributing to growth.
  • Overseas, Australian exports rose the most in three decades in April—a sign of spillover growth from emerging markets to developed.

More events will likely be labeled "crises" moving forward, and they'll cause some market volatility. But sometimes, crises aren't so critical longer term. They are frequently misunderstood or greatly overestimated. Plus, by the time they hit "crisis-gate" status, they are usually widely known. Large, underappreciated, fundamental issues going unnoticed generally drive true turning points—like the still unlabeled FAS 157 "crisis" two years ago, which greatly exacerbated liquidity issues and the bear market. So, following the real unlabeled crisis, we've had about seven labeled crises that weren't so critical—making such frequent use of the word reminiscent of the boy crying "wolf."

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.