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I like and am wary of the no-sell market

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by Peter Switzer

The becalmed market situation, where it’s the same old, go nowhere predicament ahead of Friday’s Jackson Hole meeting in Wyoming, continued to dominate Wall Street. In reality the September 6 meeting of the European Central Bank (ECB) is more important to prices of our shares but this is like a warm up act, still having a minor potential to spook or, while less likely, excite investors and professional traders.

The meeting

In case you didn’t know this, Jackson Hole is a central bankers' get together — sounds exciting, huh? Well, clearly it’s generally as stimulating as a convention of weather forecasters or actuaries but this time in the history of the financial world, central bankers hold all of the trump cards.

So, every word that comes out of Ben Bernanke’s mouth will be closely analysed. I really don’t expect much, however, I trust he will say QE3 is a real option if the ECB screws up — he won’t be rude enough to say this but it could be implied.

Europeans are more important and so is their September 6 announcement after the ECB meeting.

Interestingly, to underline the importance of the above meeting and the job at hand, the ECB president, Mario Draghi is too busy to get to the Jackson Hole junket and so is the International Monetary Fund (IMF) boss, Christine Lagarde.

Wall Street overnight

In important news overnight, US economic growth came in at 1.7 per cent, which was faster than former expectations, though the experts did anticipate this better result. Pending home sales were up 2.4 per cent and these were better than was tipped by economists.

The Fed’s Beige Book, where the Fed sums up the health of the economy found "economic activity continued to expand gradually in July and early August across most regions and sectors". There was even better job news.

Stocks squeezed out small gains Wednesday following the Fed's Beige Book report, but trading was thin and muted throughout most of the session as investors remained cautious ahead of Chairman Bernanke's speech at the end of the week.

The Dow was up 4.49 points to 13,107.48 and the S&P 500 was up 1.19 points to 1410.49, which clearly underline the becalmed nature of markets.

As well as a hurricane bears down on the Gulf Coast of the USA, there could be a good or ill-wind building in Europe next week.

Bad, good or great news?

I hope these guys and gals of the ECB and the EU leadership absolutely nail it next week. However, let me warn you — bad news will bring a big sell-off, good news could still bring a small sell-off but great news could rekindle the fire that sent stocks hurtling higher after June 4.

Hope for great news but I suspect we will only get good! That’s why I like what is going on in markets now but I’m still wary.

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: Thursday, August 30, 2012

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