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Adding a Little More Uncertainty

May 14, 2012 – 5:05 pm

Economic numbers from China and India added downward pressure to an already weak market. In both countries growth is still slowing, much of it due to continued turmoil in Europe and last year’s efforts to slow inflation. They have now moved beyond just slowing down growth to too much of a slowdown. It demonstrates the imperfect relationship between government efforts to manage large economies and a free, or in China’s case a semi free market system.

Both China and India have started to move toward loosening their tight grip of money by lowering interest rates or allowing more lending. But current efforts are now seen as too weak and slow. More will be done now that the numbers for April are out showing a sharp decline in growth.

There is no doubt that what happens in the two most populated countries, one being the second largest economy in the world, will affect the U.S. It will add to uncertainty over the summer. At the same time stock markets will recognize efforts made by these two countries to reignite growth, thus stock prices will move up long before any benefit of their expansionary efforts are seen in their economies.

We are going see more volatility then we have seen in the first part of the year for stock prices. The volatility may not be a strong as it was last summer but that will depend on the economic numbers as they unfold over the months ahead.

Good Trading
Steve Peasley

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