We are all familiar with the market adage that "hope is not a strategy". However, let's acknowledge that it is the expectation that "things" will be better in the future or the hope that today's economic data points will lead to better times are what drives prices higher. So to invest in the markets you got to have some belief or hope that you have it right.
And it is certainly hope that is driving today's market. But the hope isn't founded on robust economic data. The hope is that today's bad economic data point will lead to another bailout. Take the sovereign debt issues in Ireland. This is a serious issue with tremendous ramifications, and the market's sell off on Tuesday acknowledged those risks. But Tuesday's "bummer" led to Thursday's up day as Ireland was being thrown a life line. Another bailout was in the works.
Certainly, these dynamics are nothing new, and it is a pattern that has been going on for as long as I can remember. But two things are worth noting here. One: hope, that there is some white knight that will come to the rescue, is about the only reason the markets ever go up anymore. Two: the actions of our policymakers are becoming less and less effective.
Having hope or a belief in what you are doing is ok. It is normal. Having a solid foundation for that belief or hope is even better. Hoping for another bad data point so we can have QE3 is perverse, and going forward, I wonder if the markets will continue to reward this kind of behavior.