Where now?

Where does the rally go next?

Interesting to note that Fiats global expansion plans are not proceeding according to plan. It failed twice in its bid to expand its US and European presence in a tie up with Chrysler and Opel in Europe.
Where now for Fiats expansion plans?
Answers on a post card to the Fiat management:

The US market rally has seen the main indices reach new highs for 2009 and show a gain on the S&P of 9% over its 200 day moving average.
Why are the markets acting so positively? Is it because of the very tentative signs of a stabilisation of the housing market in the US and UK?
Is it because the financial system is stabilising and anticipated write downs may be close to an end?
Is it because China and the emerging market economies are still growing?
Is inflation on the way back? Will the global stimulus packages introduced by the US government cause the dollar to weaken and commodities prices to continue increasing over the next few years?

It was interesting to listen to Professor Niall Fergusson yesterday; his book the “Ascent of Money” documents historical financial events.
In the past capitalism would have let weak institutions go bankrupt and only the strongest would have survived. Weak institutions such as Citigroup and Bank of America have been saved, are we just temporary band aid for weak institutions?
Time will tell.

Commodities have now replaced technology as the best performing investment category of the year.
Cyclical stocks are seen as early indicators to an improving economy but with unemployment still rising and uncertainty about the government stimulus packages and future inflation are we too optimistic about the future.