Business News

It’s the Twilight Zone!

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by Peter Switzer

The only good news out of European and Wall Street market trading was that the wild stock dumping of last Friday was not sustained. We’re in a two-week “twilight zone” where both the worst and best things could happen but what happens remains an epic mystery!

If this was last September, Wall Street would have sold off again but instead the Dow was off 17.11 points to 12,101.46 while the S&P 500 was flat. The result was good considering the Yanks got their third weak factory orders reading in a row.

There is hope that something will come to the rescue of markets but what?

The good and the bad

Before we can see what might happen to help markets, let’s just recap why investors are so spooked.

This is the list:

Spanish banks look to be in trouble
The next Greek election will be on June 17 and it could mean Greece will leave the eurozone
China is slowing down faster than expected
And the US is slowing down faster than expected.

It’s a perfect storm raining on our economic and market parade.

So, what lies ahead that could change bad news to good? Try the following:

Our Reserve Bank cuts interest rates today
Other central banks, especially the European Central Bank, cut rates and add to the money supply and the Federal Reserve embarks on QE3
The Greek election results in a win by a government that sticks with the euro
The EU meeting at the end of June votes on a fiscal compact that is more growth-oriented and less austerity-preoccupied.

This is a big wish list of positive developments that could help markets but any of these could lean against the current negativity.

Until something good turns up we will be in a state of fear and loathing.

Faber’s view

One good thing was the Marc Faber call that stocks look like good value for the long-term investor. Faber pens the Gloom Boom Doom Report and is a big call merchant. He thinks bond yields in places like the USA are so low it is good for stocks in the long-term even though a fall in the near-term could hurt even good companies.

We have crossed over into the twilight zone but unlike the TV series of the same name, the scary story won’t last forever — when it comes to stocks it never does — and history shows good news turns up more often than bad news.

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.

Watch more from Peter on SWITZER TV.

Published on: Tuesday, June 05, 2012

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