Not those Greeks again?!
by Peter Switzer
Wall Street had one of those “oops have we gone too far” days overnight as Greek debt drama doubts re-emerged. This was made worse by weaker-than-expected retail numbers in the US. But despite all of this, and this is the good news, the Dow still managed to end in positive territory!
It was a surprise finish for the Dow Jones index after it had been down for most of the trading session, which was linked to a fear that a key Greek conservative politician who could have significant power after the next election might refuse to support the austerity measures passed by the parliament of Greece.
In simple terms this could lead to no debt deal from the European Union’s troika — the three heavyweights who assess the Greeks’ commitment to the reform process — which could lead to a default. The troika controls the funds that will save the Greeks and their creditors, which are European banks.
And if Greece defaults, the fear would spread to Portugal and Ireland — but even more importantly, to Italy and Spain. This is still a precarious play and that’s why the stock market isn’t getting too carried away.
There has been about a 20 per cent market improvement since October for the Yanks and around 10 per cent for us and that’s because of the negotiations in Europe, the European Central Bank’s lending to the European banks and the improving US economy. However, investors are playing the waiting game and if progress stalls, then turns into more concerns about debt deal dodging antics from any EU country, then it will be sell-off time.
On the other hand, if we keep seeing better outcomes backed up by improving economic news, then stocks will take off. Of course the stock market will get in early as it always does but at the moment there’s not enough really positive stuff to create that surge in stocks.
Wall Street overnight
For the record, the Dow was up 4.24 points to 12,878.28 while the S&P 500 just got past the new resistance level of 1350 but was down 0.09 per cent.
On the economic scoreboard, retail and car sales numbers were weaker than expected and the Moody’s downgrade of some European countries didn’t help confidence but still there was no strong sell-off.
And what about this — investor and analyst sentiment moved seriously higher going to a level not seen since April 2011 and that was before the real negativity set in last year.
We’re not out of the woods yet but we’re on the right path to those farms where the bulls are grazing and doing what bulls do.
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.
Published on: Wednesday, February 15, 2012
The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.