Global Uncertainty Weighing on Markets
Source: Sheraz Mian, Zacks Investment Research (9/26/11)
"Do we bounce back from here, as we have done a few times in recent weeks, or establish a new bottom?"
I am not the one who can see all those fancy shapes and pictures in charts that the technicians talk about all the time; I wish I could, but I can't. But I can assure you that the recent back-and-forth trading pattern of the market makes perfect sense from a fundamentals standpoint.
No one can deny the massive clouds of uncertainty hanging over the economynot just here in the U.S., but all over the world. We saw fresh evidence of a slowdown in China, thus far an engine of global growth. Europe is dealing with a host of serious structural problems that have the potential to drag everyone down. And we have our own problems that we have been trying to address solely through monetary actions.
But as we are finding out from the Fed's latest move that monetary instruments may not be appropriate in our current circumstances. We need a fiscal response from Washington, but everybody there is gearing up for next year's electoral fight, leaving them incapable to come up with anything doable or implementable. A similar leadership vacuum is visible on the European side as well. Someone put it very nicely that we have a lot of leaders, but no leadership.
Is it any surprise then that the market has been stuck a trading range? The market moves up as some of the more dire concerns about the U.S. and global economy ease. And it goes right back downas has been happening in the last few dayswhen faced with some ugly-looking numbers. With the Q311 earnings season still a few weeks away, we may have to live through this trading pattern some more.
With nothing major on the economic calendar, stocks will likely continue to reflect the fearful trading pattern of the last few days. The market is justifiably concerned about a synchronized global slowdown and we have nothing on the horizon, at least today, to address those concerns.