It's Groundhog Day Over and Over

In the 1993 movie Ground Hog Day, Bill Murray’s character, Phil Connors, is trapped in Punxsutawney, PA with every day being Groundhog Day. The tediousness of repeating each day leads to Phil being pushed to multiple suicide attempts only to awaken every morning to the music alarm of Sonny and Cher’s droning of “I’ve Got You Babe” and he’s forced to repeat yesterday. Where on earth am I going with this?! Well to a certain degree, we investors are Phil Connors trapped in the banality of 2011 and having it repeated in 2012. I have been relieved to see the major indexes enjoy the benefits of the “January Effect,” but I still think that sooner than later we will be smashing the radio alarm clock as “I’ve Got You Babe” plays over and over and over.

What has really changed since 2011? Don’t we still have major issues that weighted down markets the last quarter?  The answers are of course….nothing and yes. The key is what are those issues and when will solutions be enacted?

Europe’s debt issue remains at the forefront with not much changing from 2011. What we’re hearing from their leaders is that they agree that meetings will occur on this or that date, but we continue to see no solutions. Solutions will be hard to come by when it involves Germany being the only viable EU economy and counted on to provide the biggest and deepest pail. It won’t change as long as Greece is allowed to languish as a mortally wounded EU member and not put down and kicked out. Until a plan is agreed upon and implemented by 14 disparate countries and cultures, markets will not feel comfortable about moving to the next level.

Don’t we still have 10 trillion dollars of US debt that neither side of the aisle shows any intention or interest in tackling especially in this election year?  Thankfully since the US is most attractive and safest house in the ghetto that is the rest of the world, investment dollars continue to pour in and float our Treasury debt delaying the inevitable pain we ultimately will have to endure. The good news is that Europe’s issues have bought us additional time and moved the spotlight.

Since 2012 is a Presidential election year, the negativity of what is sure to be a tough and ugly campaign will do nothing to create confidence with consumers or traders unless the Republican candidate, whom is likely to be Romney, leads Obama in polls leading into November. It is no secret Wall Street and most business owners want to see legislative and executive change. If Obama leads in the polls and ends up being re-elected, look for markets to move sideways or selloff.

We are seeing better employment numbers; slightly better housing numbers; consumer confidence is increasing while corporations continue to have good profits and cash on hand. The investment environment is improving and if the major headwinds abate, we are poised for true market growth.

“Groundhog Day” concludes with Phil Connors ultimately using the time trapped in his Pennsylvania purgatory to better himself by learning to play the piano; speak Italian and read the classics and ultimately win the affection of the character played by Andie McDowell. Hopefully world governments including our own will use this time that the markets are affording us to make strides so that we don’t repeat the mistakes of last year.  This hall pass won’t last much longer so we need to see changes quickly or we’ll wake up to a daily dose of “I’ve Got You Babe.”

*photo courtesy of “Groundhog Day” 1993,