Why Are The Markets So Volatile?

 

 

 

 

Lots of clients and friends don’t read my entire blog every week because its….too long, too much of the stuff their not interested in and sometimes news is too depressing.

This year the stock market has not settled onto fundamentals even though the vast majority of reporting companies have increased profits and many their market share. The question is, if so many major firms are minting money why is that not being reflected in their share price? Basically it boils down to emotion over fundamentals. Here are a few other reasons…

1. Flash traders are buying and selling and sometimes a sell or buy gets to the Street before one or the other clears. Volume of shares being traded is in the billions and these traders don’t care about fundamentals. They buy on rumor sell on news…sometimes the other way around.

2.  Fear Factor. Everyone is scared of something and not going to stick around if that next something scares them. Money is whisked off the table and either profits or losses are booked. Money Managers are not hanging around like they did in 2008.

3. First it was U.S.A., worrying about a recession double dip and now it’s worry about Europe. The truth is Europe doesn’t want a depression any more than we do.  It’s all about what we don’t know and the uncertainty of what’s going on over there. Every time Chancellor Merkel opens her mouth global markets fall. She’s the German Ben Bernanke. Even with the current EuroZone deal the problems are not going to disappear.

4.  In Washington, DC we have no leaders. We have two political parties in-fighting for their benefit and no one else. There is no LBJ, Reagan or Clinton to make Congress do what has to be done. There’s a lot of that in Europe, which is another part of their problem.

5.  The Federal Reserve cannot do anything else. Period. Done.

6. Corporations not hiring simply because they are fed up with all the regulation and nonsense coming from Washington and don’t know what to expect next. They’ll keep their cash and profits and wait this administration out.

7.  Short sellers working the volatility and when markets reverse they have to buy to cover their bets. Just more up and down making all of us sea sick.

8. The housing market is a mess. No one has paid a lick of attention to it except bailing out banks.

9.  Banks not worried about consumer but putting cash into coffers and waiting this administration out.

There it is. Nothing fancy just good old fashioned distrust, lack of leadership and no magic that’ll get Washington to work like it should. Hope this helps you understand it isn’t your investment giving you heartburn- it’s a lot of other stuff.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.