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Now a look at what's happening in the markets. Stocks mostly lost ground this week, but over the past couple of months, the stock market has made enormous gains. Here's one example. The S&P 500 index is up 31 percent in little more than nine weeks. Does that mean that the worst is over? NPR's Jim Zarroli reports.
JIM ZARROLI: On Wall Street there are rallies and then there is the sucker's rally.
Dr. CHARLES GEISST (Financial Historian, Manhattan College): It's a rally for those who aren't too particularly sophisticated or retail investors or small institutional investors who are looking for a glimmer of hope. They think they see it and they run in and buy stuff only to find out that within a month or two afterwards they're going to lose again.
ZARROLI: That's financial historian Charles Geisst of Manhattan College. Geisst says it's not unusual in deep economic downturns for the stock market to go through false springs, when people think the rebound is at hand and bid up stock prices, only to have them fall again when reality intervenes. He says it happened several times during the Great Depression and it happened during Japan's lost decade of the 1990s. So how do we know the recent surge in stock prices is a sucker's rally?
Ms. LIZ ANN SONDERS (Chief Investment Officer, Charles Schwab): We don't.
(Soundbite of laughter)
Ms. SONDERS: I mean, that's the honest answer. We don't.
ZARROLI: Liz Ann Sonders is chief investment officer at Charles Schwab. Sonders is fairly bullish about the market right now. She says you can't know for sure. But she believes the recession is probably waning. And that the recent rally has a good chance of sustaining itself. She says last year when stock prices were falling so much, a lot of big investors sold off their holdings, took the money and essentially stuffed it into their mattresses.
Ms. SONDERS: This year, with a market that in some people's minds is sort of running away from you, it's much less palatable to be sitting there holding a ton of cash, earning, you know, next to nothing.
ZARROLI: Sonders says investors have a strong incentive to keep their money in stocks because there's nowhere else to put it. Interest rates on things like Treasury bills are so low that no one can make any money on them. That could change if the economy takes another turn for the worse. But it doesn't seem to be doing that. In fact, things have stabilized, or at least they aren't declining as fast as they were.
But there are skeptics. Charles Geisst says the economy may not be declining as fast as it was, but the fundamentals are still terrible.
Mr. GEISST: There's no point in saying the stock market is looking good if the automobile industry in the doldrums. In fact, the banking industry, the finance industry, is for the most part on its knees.
ZARROLI: For the rally to endure, Geisst says, the economy has to show some real underlying strength. Housing prices have to turn around or companies have to start hiring again. And there's no sign that either of those things is even on the horizon. And Geisst says he thinks the markets are already beginning to realize that.
All of the enthusiasm of just a couple weeks ago appears to have cooled this week. The economy, he says, is bound to recover eventually. And when it does, stock prices will see lasting gains. But, he says, not for the first time the stock market has jumped the gun.
Jim Zarroli, NPR News, New York.
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