Broker Check

The Long Pause

| October 11, 2016
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The market hasn’t cooperated lately.  On the other hand, it hasn’t been uncooperative either.  It’s simply in a pause, a stick in the mud, a stump that won’t move you could say.  It has been bouncing around its current levels since early 2015.  Ho hum economic reports, acceptable but not exceptional earnings quarters from companies.  A constant argument of when the Federal Reserve will raise interest rates.  A murky international picture, with uneven economic growth and contraction as well.  On top of it all, we’ve had a presidential election campaign that has been one for the books.

I suppose all of these factors, and even some that I didn’t mentioned have given the market a pause, or a time for reflection.  Above all else the market hates uncertainty, after all it’s the golden rule.  The market may not like the information, but as long as the market knows the information, it usually handles itself pretty well.  The uncertainty surrounding the interest rate policy, presidential election, and international picture have left a lot of major market participants bewildered to say the least.

Last but certainly not least, the market seems to be taking considerable direction from the price of oil.  The running theory is if the price of oil rises the economy must be humming along.  If oil falls the world economy is slowing down.  While that’s way too simplistic of a view, that most definitely seems to be the way things are being interpreted.  The oil sector is a huge part of the U.S. and world economy.  A lot of international budgets, and government spending are directly related to the price of oil.

Sentiment in the market has also changed from upbeat to being suspicious.  Economic reports whether good or bad are looked at with doubt.  The American economy has politicians and the general public flummoxed at the moment.  It seems everyone is having trouble figuring out if things are good or bad.  Federal Reserve officials can’t seem to decipher the signs.  Every expectation of an interest rate raise is pushed out, because certain benchmarks in the economy haven’t been met.  What those benchmarks are haven’t been made entirely clear to the market.

Earnings season is now once again upon us.  U.S. companies have faced multiple quarters of stagnation, and the market is looking for any signs of improving numbers.  One of the main themes of this year is that the market is overvalued in various areas.  Better earnings numbers could help bridge the gap and give relief to those wondering if the economy is on shaky ground.

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations of any particular security, strategy or investment product for any individuals. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

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