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The Push and Pull on Stock Prices

February 24, 2012 – 6:34 pm

The market is subject to many different pressures. The most important of these is the prospect of future earnings growth. That is key to improving stock prices.

Other pressures come from international turmoil either in manmade or natural disasters. We saw both strongly influencing stock prices last year with the Japanese earthquake and the debt Europe is struggling under.

This year will add another pressure on our market and that will be the U.S. Presidential election. During an election year our politicians usually try to not do anything that will upset the voters. They will not pass any major reform or spending cuts. Case in point was the release of the budget by the President this week. There was nothing in it that could work up any fervor with the constituency.

For 2012 that leaves our economy and Europe as the major issues, but minor issues, if you can call them that, are China’s growth and Iran with the Middle East mess.

Then again some natural disaster is possible.

In the face of these uncertainties the stock market has and continues to march up. That leads me back to the most important prospect and that is earnings. As long as the U.S. economy continues to improve, though it is a slow and painful process, corporate earnings should keep rising. Traders and Investors see better times ahead. Let’s hope they are correct in their assumptions.

Good Trading
Steve Peasley

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