What's going on?

US and European stocks had their first weekly gains of the year last week: +1.4% and +2.5% respectively!

What does this mean?

The rebound started Wednesday afternoon in the US and spread globally on Thursday as the President of the European Central Bank suggested that it stood ready to increase its support of the economy. The oil price also rebounded dramatically from its low on Wednesday. It�s now up almost 20% since then (at $32/barrel). There didn�t appear to be any one reason for the oil rebound and yet sentiment certainly shifted to a general belief that oil had become too cheap. The dramatic move higher was probably helped by the fact that many investors were setup to profit from a further price decline (a.k.a. �shorting�), and when the rebound started they scrambled to buy oil in order to limit their losses (a.k.a. �short-covering�).

Why should I care?

The bigger picture: �The risks are perhaps now �priced in.� Investors were probably feeling that with stocks down more than 10% to start the year, the concerns that started the selloff were more than �priced in.� Economic growth still looks like it�s slowing and, while markets in China appear to have calmed down, the bigger impact of China�s slowing economy remains a concern. Still, with meetings from the US Federal Reserve and the Bank of Japan this week, there is also the belief that more supportive words will be coming from central banks.

For you personally: Expect volatility. There has been a HUGE amount of stimulative measures from central banks since the financial crisis – and stocks have tripled in price. The US Federal Reserve is trying to normalize things: it stopped buying government bonds in 2014 and raised interest rates for the first time last year. But weaning the market of its medication is difficult (and Europe and Japan haven�t even started to try yet). Without the support of its �meds�, investors should be mentally prepared for markets that are likely to be a lot choppier � but hopefully fundamentally healthier.