As regular readers know, the market traded higher in March and April due in large part to the expectation of government intervention. The government essentially lined up a series of events that investors could cling to optimistically. The stress test was the last of these events. The most important facet of this intervention was that it removed a lot of uncertainty in the market. Like a parent holding a child’s hand there was nothing to fear in the market as long as the government was intervening. Now that the government has effectively recapitalized the banks via the private market and given the banks another 3-6 months of life investors can breath a bit more easily, however, dad has left the room for now and the children could get unruly in short order…..With the government out of the way I expect the market to begin trading much more naturally now, i.e., based on its real fundamentals. This leaves the door open for uncertainty to creep back into the room and investors hate nothing more than uncertainty.