Financial markets calm down today
Equity markets in particular calmed down today with modest gains, modest gains that in no way offset recent significant losses, especially those of yesterday. Today's performance should not be viewed in any way as reassuring or indicating a turnaround.
With the Syria atrocity reprisal, possible reprisal should be said with all of the equivocation underway, still looming, investors are staying liquid, meaning low volumes, and they are raising cash on almost every position in modest increments regardless of financial results. Given the solid July performance they have room to pare down and not overly impact their overall performance.
There are no compelling events to propel the market higher, and potential higher oil prices are not a positive. The results of many retailers, especially those in the middle, meaning not high end and not bargain bins, seem to be moribund at the moment, so the consumer is not going to pull the market up near term. The good news, rising from low levels the housing market this year did relatively well but now appears to be leveling off in most markets, if not slightly backtracking. The accepted rationale for this is the modest rise in mortgage rates that are still at historically low levels. The truth is more likely that buyers who were in the market have already made their move and consumer "wealth" is such that more buyers with 20% or more down payments are not coming out of the woodwork in any meaningful way. Then again, sellers want what they expected to get a few months ago and that has slipped modestly to something they won't accept.
The strong run in financials over the past four months appears to be easing, or has stopped, as any geopolitical clashes could cause at least a temporary disruption in global trade and global money flows. On top of that the Obama's Justice Department just can't get enough joy out of thrashing the banks for events that occurred six, seven, or eight years ago, as well as interfering in current internal matters in which banks have already taken their losses. Obama will soon no doubt once again accuse the banking industry of not lending enough at the same time that he and Eric Holder, his faithful executor of both Obama's constructive ideas and his personal vendettas, are trashing the banks' reputations and balance sheets.
While employment data and tapering concerns often dominate the near term market valuation discussion, both are less important than overall economic growth, corporate earnings results and responsible government behavior in Washington. The reliability of employment data is clouded by many variables as discussed in a post here on August 4 and tapering will, of course, must, eventually become a reality of steady decline unless we are heading down Japan's path of low growth and no return on savings for multiple years.
For all of the above reasons, one could reasonably expect that the equity market is in a topped out trading range, some days up, some days down, for the near term, and that would be good news. Things could be worse.
With the Syria atrocity reprisal, possible reprisal should be said with all of the equivocation underway, still looming, investors are staying liquid, meaning low volumes, and they are raising cash on almost every position in modest increments regardless of financial results. Given the solid July performance they have room to pare down and not overly impact their overall performance.
There are no compelling events to propel the market higher, and potential higher oil prices are not a positive. The results of many retailers, especially those in the middle, meaning not high end and not bargain bins, seem to be moribund at the moment, so the consumer is not going to pull the market up near term. The good news, rising from low levels the housing market this year did relatively well but now appears to be leveling off in most markets, if not slightly backtracking. The accepted rationale for this is the modest rise in mortgage rates that are still at historically low levels. The truth is more likely that buyers who were in the market have already made their move and consumer "wealth" is such that more buyers with 20% or more down payments are not coming out of the woodwork in any meaningful way. Then again, sellers want what they expected to get a few months ago and that has slipped modestly to something they won't accept.
The strong run in financials over the past four months appears to be easing, or has stopped, as any geopolitical clashes could cause at least a temporary disruption in global trade and global money flows. On top of that the Obama's Justice Department just can't get enough joy out of thrashing the banks for events that occurred six, seven, or eight years ago, as well as interfering in current internal matters in which banks have already taken their losses. Obama will soon no doubt once again accuse the banking industry of not lending enough at the same time that he and Eric Holder, his faithful executor of both Obama's constructive ideas and his personal vendettas, are trashing the banks' reputations and balance sheets.
While employment data and tapering concerns often dominate the near term market valuation discussion, both are less important than overall economic growth, corporate earnings results and responsible government behavior in Washington. The reliability of employment data is clouded by many variables as discussed in a post here on August 4 and tapering will, of course, must, eventually become a reality of steady decline unless we are heading down Japan's path of low growth and no return on savings for multiple years.
For all of the above reasons, one could reasonably expect that the equity market is in a topped out trading range, some days up, some days down, for the near term, and that would be good news. Things could be worse.
posted by John Borden at 4:53 PM
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