Bear trap or bull rush?
by Peter Switzer
Right now with Greece and its piggy mates spooking stock markets, the question for money makers is, 'will there be more correction or a spurt in the market?'
It gets down to, are we heading for a bull rush or a bear trap, or should it be called a PIGS trap?
Putting pressure on share prices over and above the debt problems of Europe has been the US central bank boss’s comments this week. The Federal Reserve Chairman Ben Bernanke explained how the Bank will pull back on economic stimulus measures.
Some commentators think these comments say interest rates could rise earlier than next year in the US, though others say it will be later. These negative types throw in Greece and then stubbornness of the US unemployment and the poor job creation to say the market goes down.
Some think the Dow drops 1,700 points or so but that could be only in a worst-case scenario.
Last night on my program SWITZER on Sky News Business Channel, Paul Taylor, who heads up Fidelity Australian Equities Fund won’t put a number on where the S&P/ASX 200 will go to, but he says it’s up and he’s buying companies he likes big time.
Also my mates at RBS Morgans are in the market goes higher camp with numbers like 5,700 on their computer screens.
Mike Rubino, president of Rubino Financial, gave CNBC a fair assessment.
“Either the market does correct full blown at this point, or we see one more small pop to the upside before the real issues of deleveraging hit later this summer—with the mortgage resets that are coming down the line,” Rubino told CNBC.
A pop would take the Dow to 11,000 to 11,300 over the next few months, on his calculations.
So has there been any good news to counter the worries in Europe? Well, yes, the Yanks have found jobs, which is a big issue for the stock market this year for Wall Street.
We have just learnt that weekly jobless claims fell by 43,000 last week, when around only 15,000 were expected.
Meanwhile in doubtful debt-land — Europe — there has been progress but not enough and this will keep the market edgy.
European leaders have promised to support heavily indebted Greece to prevent a crisis of confidence, but markets want details and not just talk. Until this happens the short-sellers, profit-takers and hedge fund managers will play with the market and keep us bulls on tenterhooks.
Make a choice
If you hate the drama of the stock market, you could look at the eight per cent bank deposits for five-years but remember, if inflation goes up and interest rates do too and the stock market rises by double digits you could kick yourself.
What you do depends on who you are and how you want to trade of return for risk. Hope you make the right choice.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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Published on: Friday, February 12, 2010blog comments powered by Disqus