Hoping for a rally

It has been a roller coaster ride over a year in the market; a ride that just seemed to continue to go downhill with no bottom in sight. It has been an incredibly difficult year for everyone. Navigating through these challenging markets is unnerving…..but there seems to some ray of hope at least for short term….. Legislative actions aimed at mark to market accounting principles could trigger a rally in financial stocks and the overall stock market. In fact, some wise guys are predicting to see a rally of up to 25% in stocks. There is also an expectation that the so-called Uptick rule, which limits short-selling in stocks, could be restored soon. It is somewhat believable since Stock markets have been so beaten up and equities have been so oversold. One will have to watch for realistic trends that are sustainable. The current scenario still dictates the defensive strategy allocation for underweight in stocks and overweight in cash and bonds. However one can certainly spot some improving trends in utilities, health care and technology sector besides ever green energy and bio tech. When market does turn around the small and mid cap growth stocks are expected to outperform large cap growth and large cap value stocks. This widely popular theory should hold true. And this should provide some great incentive for bargain hunters. Though one has to keep in mind that short-lived rallies are common during periods of extended declines as the market searches for a bottom. I think buzz word for current scenario is caution with optimism…. Cheers!