| Wait And Think About It |
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| Written by Jennifer McClelland |
| Thursday, 01 October 2009 19:41 |
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As said in an past article, from time to time the best movement is standing still. As true as that is, after the three month economic rally we've seen, it's time to stop and refocus. In a discussion in the remarks of a previous post regarding the new Northrop Grumman agreement, this author made the subsequent comment, to the arrangement of both parties involved in the conversation, "However, you mentioned we had the biggest rally in history. That is true, and it concerns me slightly. Our recession hit a false bottom. I'm afraid that people will get too excited and we will hit a false rally. I'd like to see a slow, steady rally as we rebuild a firm foundation under it, instead of just setting up another rollercoaster ride." That is exactly what you are currently seeing.
As said in an past article, from time to time the best movement is standing still. As true as that is, after the three month economic rally we've seen, it's time to stop and refocus. In a discussion in the remarks of a previous post regarding the new Northrop Grumman agreement, this author made the subsequent comment, to the arrangement of both parties involved in the conversation, "However, you mentioned we had the biggest rally in history. That is true, and it concerns me slightly. Our recession hit a false bottom. I'm afraid that people will get too excited and we will hit a false rally. I'd like to see a slow, steady rally as we rebuild a firm foundation under it, instead of just setting up another rollercoaster ride." That is exactly what you are currently seeing. We are stepping to the left at the moment, and then taking a step or two back to take a look at what we are at present doing. That is healthful and, albeit odd to admit, encouraging. Investors have been plucky but clever and it paid off for three months in a pleasant rally. Investors are now backing off with the news that the signs of economic growth have slowed down and will need more solid evidence of recovery before going further. With the fear of rising interest rates, inflation, the falling value of the US dollar and rising commodity costs, it is understandable and strong. The slipping dollar and inflation are wordlessly robust concerns. Reservations over government arrears (partially created by the complete TARP mess) that has began to lead to a little further printing is beginning to drop the worth of the dollar. Merge that with fears of inflation or a increase in interest rates by reason of impending labors by the Federal Reserve to trump inflation and you have a very unsound economic system on which to run a stabilizing market. Be encouraged, however, because investors are doing the right thing and the economic slowdown after a hefty rally is a great, healthy thing. This gives the economy to even out and build under the new rally ahead of starting another one and gives the state time to begin giving the dollar financial CPR and allows the Fed to control interest rates and inflation. Everyone wins. "A sideways move in the economy is in fact a corrective move. You dispose of the overbought state when you move sideways," said Keith Springer, leader of Sacramento-based Capital Financial Advisory Services. Analysts and experts warn that the rally was a bit too much for the economy to control and that a minor pullback is in order to recapitulate and coagulate before moving at all further. The S&P 500 index ascended 40% ever since March, something that usually takes years to accomplish. That is massive and requires a fit break to gauge the situation and look for helpful news prior to pressing on. The major indexes stirred less than 1% last week, creating a pleasant hard halt. "I'm likely to take the economy action the last two weeks as sensibly positive," said Uri Landesman, from ING Investment Management worldwide increase strategies. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Learn more about keyword #1. Stop by Jennifer McClelland's site where you can find out all about investing and what it can do for you. |