Be wary of recent market negativity as it could reflect short-termism that you should expect from traders — these guys play a short game and provide buying opportunities for the longer-term investors.
When I woke up this morning I thought the positive lead from Europe was a nice sign.
The UK’s FTSE was up 0.65 per cent, the French CAC 40 put on 0.59 per cent and the German DAX rose 0.79 per cent. These were powered by good outcomes from the eurozone finance ministers’ meeting in Brussels and the expectations that the German constitutional court would approve some of the recent actions to rescue the eurozone’s debtor nations.
However, Wall Street wanted to concentrate on profit warnings from local firms and China’s weak trade data. There’s no really good news and there’s lots of potentially worrying news and so the market is drifting downwards. We need a circuit breaker. It could be better-than-expected earnings, which would surprise me given the weaker US economy and slower world economy, and so it might be QE3 that could provide the shock to buyer enthusiasm.
I don’t worry about China (even the GDP numbers on Friday are on the weaker side), as they have the firepower to kick-start their economy. My concern is Europe and that’s why last night’s news should have created a mildly positive response.
The Dow was down 83.17 points or 0.65 per cent to 12,653.12 while the S&P 500 was off 10.99 points or 0.81 per cent to 1341.47.
I didn’t like Alcoa’s share price falling after a better than expected profit report yesterday and the VIX or fear index did rise from 18 to 19, which reflects creeping anxiety for stock players.
For the long term
All the experts know stocks are cheap but no one wants to go too long stocks now because of the concerns about China, the USA and Europe. But as I have argued in the past, there’s not an avalanche of sellers trying to dump stocks.
I reckon our market will find it hard to resist gravity today but over the next few weeks there will be buying opportunities for good stocks you will want to keep for the long-term, which will make you very happy with yourself come Christmas time. It will take courage, but fortune favours the brave.
However, it can also favour the investors who play the long game using the lessons of the likes of Warren Buffett — buy great quality companies that you want to do business with and you want to hold as stocks as a consequence.
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