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What Matters

October 28, 2011 – 5:10 pm

With the very strong rally from a low made at the beginning of October the market is now overbought after being oversold. These are short term movements that are very difficult to recognize beforehand and almost impossible to time.

The more important issue, and one that matters longer term, is what happened in Europe this week where the EU has agreed to take stronger steps to deal with the debt issues in Greece and bank recapitalization.

Of course Europe is not the only problem but has and will likely continue to be an issue. We in the U.S. have our own debt issues with the super committee meeting. So far they have been very quiet as to what they are doing. Our issue won’t be as impactful as Europe because there will be automatic budget cuts made to our spending if the super committee comes up empty and there is no fear that our debt will be paid in full.

The third area of concern is China with its very large economy which has been slowing in recent months. The worry is that they may have overshot in their efforts to slow their economy fighting inflation. Did they go too far? China appears to have at least gotten a handle on their inflation and there are signals that they will relax their tight money efforts to some degree.

Though our economy is still weak it is showing signs of some growth, not enough, but at least growth. Europe has pushed their problem down the road and China is going to help boost world growth. For the time being things are looking up. The stock market’s recent rally may hit some headwinds in the short term but a year end rally has already begun.

Good Trading
Steve Peasley

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