Wednesday, May 04, 2016

Equity market is influenced in recent days more by the bigger picture

Macroeconomic issues are influencing the recent equity market's decline more than day to day or week to week data reports, or corporate earnings or outlooks.  China remains central to these macroeconomic concerns and it is clear that the growth outlook there is clouded.  For anyone that has tried to invest in China based stocks, the feeling may be familiar.  You can get an idea about the potential but the details are not available.  That is indeed the case for China as a whole now.  There is a feeling that is being developed that the Chinese growth story is being propped up by government intervention that will eventually not be sustainable.

Apart from that, Russia is in a dismal economic situation that will test Putin's nationalistic grip if it continues, and financial markets globally are being tested by the view of many governments that austerity measures in the face of economic adversity are the right course of action.  Then, of course, there are the dire problems in the Middle East and the curse of North Korea.  Top that off with a U.S. President that is already a lame duck in terms of any sweeping action or any significant credibility in reserve, and a Presidential race that is viewed as borderline insane by much of the world, add it all up and there are concerns far beyond the latest job claims numbers.

If the U.S. market's regular churn that is underway now is simply part of the ebb and flow of U.S. numbers and investor sentiment, the market will settle in at some level and reprice from there.  If global macroeconomic issues take hold, market predictability is less certain and will lead to a more defensive posture by investors.

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