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In the midst of increasing economic decline and uncertainties, the US stock market has been able to spread some serious waves by simply delivering a good performance for the year. Much of this unexpected reinvigoration is probably due to stimulus efforts initiated by the world’s central bank as well as the country’s Federal Reserve Bank.
Analysts have however expressed worries that the gains might have had their final curtain calls, as all of the gains must have been seen. In a reaction to this, a market strategist further buttressed this point when she said that “I’m not suggesting for anyone to get out of their equity positions, but our view is that most of the gains for the year are behind us”.
But what are the reasons for this looming stagnation on the market? According to investment strategists there are many factors responsible for mounting pressure on stocks. One of the most obvious obstacles is the November 6 presidential elections; one major effect of this is the fact that traders, investors, policy makers, and virtually all stakeholders in fact, are adopting a sort of wait-and-see approach, which has resulted in stocks trading in a narrow range. It is likely therefore that once the presidential elections have beenconcluded, the market will reclaim some of its vigor, and bounce back on a high.
But there may be another set hurdle to exert pressure on the market;and that is the passing of the budget that must be carried outby the emerging government. After an initial activity, investors and traders would still have enough patience for the fiscal cliff to be leveled and the budget successfully passed. This much was emphasized by Oliver Pursche, president of Gary Goldberg Financial Services, who expects the S&P 500 to finish the year at 1,435.
As long as Congress remains noncommittal about how to avert the fiscal cliff, “at best, it will be a turbulent time for the markets,” said Pursche.
The market has not been helped by the political and economic situations in Europe, with the debt crisis looming over the Union and raising skeptic’s fears about investment potentials in the area, and the volatility that could double risks for investors. The recent intervention of the European Central Bank with the about-to-be introduced ESM, the market is beginning to gain momentum and stay afloat.
“All the liquidity they’re slushing out is keeping a floor underneath the market,” said Pursche. “As a result, we’re not expecting to see a material decline in stocks. But we also don’t foresee any catalyst that could propel the market significantly higher.”
Whatever it is, the stock market rally may continue for as long as the good news from Europe and America keeps coming, any other turn of events will likely have a devastating effect on the market.
