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Is this another sucker’s rally?
by Peter Switzer
History says September is the scariest month of all but after August, when our markets gave up 3.3 per cent, some experts hoped we had done our September one month early. They could still be right but it is now in the hands of the EU officials and those global strong economies riding to Europe’s rescue.
Yesterday it was China considering an Italian affair with the country’s increasingly unpopular bonds. And today we have the BRICs — Brazil, Russia, India and China — countries supposedly showing interest in Eurobonds.
A meeting in Washington on 22 September could provide more details and hopes for Europe and global investors. I said this yesterday and I have been saying it for some time — Europe needs a credible, positive circuit breaker to turn around this negative sentiment.
Euro issues
EU leaders haven’t covered themselves in glory. In fact, they have egg all over their faces and it explains why markets are so unsettled.
US investment guru, Dick Bove, of Rochdale Securities says Europe needs a TARP-like program that bailed out US banks and I think he’s right but the disunity of the so-called European Union works against a sensible solution.
In other news, the Greek PM is scheduled to meet with the leaders of Germany and France soon — this was greeted as a positive sign but who really knows? Meanwhile, news from Italy and Greece on the passage of austerity measures through the respective parliaments will be eagerly watched by market experts.
We play a wait-and-see game but global investors really wish they were waiting on people they had a whole lot more confidence in.
Overnight, the Dow was up 0.4 per cent to 11,105.85 while the S&P 500 was up 0.91 per cent to 1172.87.
Rally ahead?
Overnight the Yanks got inconsequential economic news but over the next six weeks, which will see stock markets traverse the second-scariest month of all — October — if the US economy picks up as many experts believe, and so do I, then a rally will happen in the last quarter of 2011.
However, we will need to see the European mess sorted out and we don’t need the US Congress to play chicken with financial markets. In November, the country’s politicians have to come up with their fiscal plan to cut the deficit and it now has to incorporate Obama’s jobs plan.
I wish I could joke that it’s fun and games ahead but with all of our portfolios dependent on the US, as well as Europe, this is serious and it’s business, not fun by a long chalk!
Finally, in the short-term, if EU leaders can pull off a credible play, this should be a believable rally but if we get the same stupidity from these guys, the current market comeback won’t even become a rally, let alone a sucker’s rally.
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: Wednesday, September 14, 2011
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