Latest stock market news from Wall Street - CNNMoney.com

Wednesday, September 10, 2008

4 Stages of Stock Market

1st phase - emerging from recession, coys repair balance sheets, profits down, equity prices down.

2nd phase - profits return, equity prices start to rally. Last the longest. VIX about 15.

3rd phase - spread starts to rise, end of credit bull market but equity prices continue to rise. VIX about 22. Banks underperformed as credit spreads rose. This is a matured bull market phase where major bubbles developed.

4th phase - equity and credit prices both fall together, with falling profit and worsening balance sheets, insolvencies.

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