Equity market today --- profit taking or reality check
Today's activity in the U.S. equity market started out as reassuring, modest gains through mid-day indicated a welcome calm relative to some of the volatility in the last two weeks. Relative calm is said because that relative volatility has been in the aggregate moving the market down recently.
Then out for an afternoon of errands here and when I returned it appears that the market did not like my choice of food for dinner or did not appreciate the collating and copying done in preparation for meeting our tax accountant tomorrow. Not that I take the market's collapse this afternoon personally.
On the surface the past week has looked like pure profit taking unrelated to any changes in financial performance. Some stocks that had been particularly high octane in 2014 were retracing a portion of their gains quickly. Stocks in general, most with no news of consequence or no news at all, were sliding. Green was not a prominent color on most screens.
Is this just profit taking after a solid start to 2014, especially in some sectors, or should one take a step back and wonder whether this is reality showing up. Has the market been naive and overpricing stocks relative to the strength of the economy and the outlook for growth. Might one say broadly "what meaningful growth"? Soon the "we had a really bad winter" excuse for any disappointment will run out. What comes next?
Just because there is no other game in town, with bond yields unattractive and commodity prices weakening apart from food., does not mean that the market cannot fall. Over the long term supply and demand does not determine equity values, real returns do. That is what the overall market in its collective wisdom may be searching to determine at the moment.
There was one other wrinkle today. The closely watched Russia/Ukraine/the West situation seemed to hit another stress point as new sanctions against Russia were back on the discussion table after yesterday they seemed to be off. I can't keep up with this, and think that the impact of this is day to day, and exaggerated by market pundits today.
Something else is afoot.
Then out for an afternoon of errands here and when I returned it appears that the market did not like my choice of food for dinner or did not appreciate the collating and copying done in preparation for meeting our tax accountant tomorrow. Not that I take the market's collapse this afternoon personally.
On the surface the past week has looked like pure profit taking unrelated to any changes in financial performance. Some stocks that had been particularly high octane in 2014 were retracing a portion of their gains quickly. Stocks in general, most with no news of consequence or no news at all, were sliding. Green was not a prominent color on most screens.
Is this just profit taking after a solid start to 2014, especially in some sectors, or should one take a step back and wonder whether this is reality showing up. Has the market been naive and overpricing stocks relative to the strength of the economy and the outlook for growth. Might one say broadly "what meaningful growth"? Soon the "we had a really bad winter" excuse for any disappointment will run out. What comes next?
Just because there is no other game in town, with bond yields unattractive and commodity prices weakening apart from food., does not mean that the market cannot fall. Over the long term supply and demand does not determine equity values, real returns do. That is what the overall market in its collective wisdom may be searching to determine at the moment.
There was one other wrinkle today. The closely watched Russia/Ukraine/the West situation seemed to hit another stress point as new sanctions against Russia were back on the discussion table after yesterday they seemed to be off. I can't keep up with this, and think that the impact of this is day to day, and exaggerated by market pundits today.
Something else is afoot.
posted by John Borden at 6:13 PM
1 Comments:
This looks like a real correction underway. Nothing to do but trim around the edges and wait it out.
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