Jitters
Global Equity markets are down across the board today. The Dow, for example, closed down 150 points with subprime mortgages and disappointing earnings cited (Sears lost 10% of its value today, for example). Oil is back above $72 on the NYMEX and the dollar is at an all-time low against the Euro.
But this is really not as bad as it sounds. I've been saying that stocks are a bit overvalued citing "irrational exuberance" more than once. Earnings are not keeping pace with market valuations, so I see this correction as a healthy one. I have also been steadfast in my belief that the Fed will not cut rates anytime soon and there is a still a chance that they will hike rates before the year ends. Fed fund futures now agree with me as a rate-hike possibility is now derived as about 50-50 by year's end. With not a single major national bank seen cutting rates in the last year, and almost all in a rate-hike mode, I think my prediction is well safe.
One last thing I want to mention is that the Dow consolidating between 13,300 and 13,700. We are getting a shrinking range since the beginning of June. I haven't seen this kind of neutral pattern in years. I expect this cone to squeeze down further until the pattern breaks. If it breaks down, we could see a significant drop.
Will earnings prevent a serious bloodletting? We shall see.
But this is really not as bad as it sounds. I've been saying that stocks are a bit overvalued citing "irrational exuberance" more than once. Earnings are not keeping pace with market valuations, so I see this correction as a healthy one. I have also been steadfast in my belief that the Fed will not cut rates anytime soon and there is a still a chance that they will hike rates before the year ends. Fed fund futures now agree with me as a rate-hike possibility is now derived as about 50-50 by year's end. With not a single major national bank seen cutting rates in the last year, and almost all in a rate-hike mode, I think my prediction is well safe.
One last thing I want to mention is that the Dow consolidating between 13,300 and 13,700. We are getting a shrinking range since the beginning of June. I haven't seen this kind of neutral pattern in years. I expect this cone to squeeze down further until the pattern breaks. If it breaks down, we could see a significant drop.
Will earnings prevent a serious bloodletting? We shall see.
posted by Praguetwin at
10:12 PM
2 Comments:
Can you explain for use simple folks these simple terms used in stock exchange and banking. An idea to start with: "interest rates" and why they keep changing them.
By
Anonymous, at 10:22 PM
Interest rates are raised to curb inflation, and lowered to stimulate the economy.
Those are the most basic reasons.
So in 2001, when the U.S. was in a recession, the Fed cut rates aggressively.
Now, with inflation pressures cropping up, banks are raising rates to combat that inflation.
Thanks for asking.
By
Praguetwin, at 12:14 AM
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