Zen International: The Dow Jones Industrial Average and the S&P 500 are both at their highest levels in nearly 18 months and with the Dow closing at 10,850.36 last Friday, a mere 150 points would see it breach the psychological to reach 11,000 barrier.
Still, analysts at Zen International say that, with benchmark US Treasury yields approaching 4 percent, wary investors may opt for the relative safety of US government debt rather than continue to throw money at a stock market that has risen sharply for more than a year.
Nevertheless, the Asia-based investment boutique expects enough investors to participate in adding what it calls froth to the market. The firm said that expectations are running high that the US non-farm payrolls data due out on Friday to show that the US economy created about 190,000 jobs in March.
Stocks closed higher for a fourth consecutive week, at levels not seen since September 2008, as recent worries arising from fiscal problems in some European countries and the US healthcare reform bill receded.
A European Union accord on a safety net for beleaguered Greece restored investor confidence, but Zen International believes that this could evaporate if sentiment turns negative after a worse than expected payrolls number.
Zen International analysts suggested that investors are making the conscious decision to effectively ignore the dire state of the sovereign debt market and the persistently muted growth numbers from developed economies because of the performance of global indices. The consensus at the firm is that markets are set for a sharp correction in the coming weeks or months ahead and that clients should avoid acquiring frothily priced stocks.