Commos to the rescue
by Peter Switzer
Volatility reigned again on Wall Street with the Dow down 179 points at one stage but to defy expectations, which the markets have been doing lately, the big index ended up with a major rally pushing the NYSE benchmark up more 68 points!
Why? Blame it on the Chinese. Isn’t it weird but when Lehman Brothers proved it was big enough to fail, the Chinese were the first to launch a massive stimulus program that spurred on other economies to get stimulating.
Well, overnight, just when Wall Street looked set to head into substantial negative territory, the Financial Times came out with a story that a Chinese fund was looking at buying a substantial tranche of Italian bonds.
In the absence of any credible leadership and decisions by EU leaders to turn around this Euro-debt drama, it’s good to see China step up to the plate. While it might not be the leadership that the free world feels comfortable with, at least the Chinese are used to exerting influence, which is what leadership is all about.
Of course one action like this won’t fix the Euro-debt debacle but we need to see a succession of positive circuit-breakers like this in coming weeks to allay investors’ fears.
All of this comes as the consensus of US economists pulled back their 2011 forecast for economic growth. The National Association of Business Economics survey downgraded growth from 2.4 per cent to 1.7 per cent but this is still a long way off a recession.
Meanwhile, the chief economist at J.P.Morgan Private Wealth Management in New York, Anthony Chan, does not see a recession scenario ahead and advised investors to stick with big cap, dividend-paying stocks. This is a strategy that makes sense until we can be certain that the worst of this market volatility is behind us as right now quality companies are being assessed on a worst-case scenario basis.
Undoubtedly, we’re in dangerous market waters at the moment but it’s great to see a positive finish to what looked like a looming nightmare on Wall Street.
For the record, the Dow was up 68.99 points, or 0.63 per cent, to 11,061.12, while the S&P 500 went up 8.04 points, or 0.7 per cent, to 1162.27.
I’m really hoping that the Europeans have a cunning plan to wait until the moment of market capitulation and then they will ride in with a big move — a shock and awe play — which will turn around this negative sentiment. It’s a nice thought. I only wish our European buddies had a history of surprising us on the over-achiever side but they don’t.
mportant 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.
Published on: Tuesday, September 13, 2011
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