Man-oh-man, the battle is raging now. The push and pull between the bears and the bulls is both riveting and disconcerting. It is like the moment of passing a car crash – you are compelled to look even though you know you are looking at potential pain and suffering.
At one point today, the Dow was well over 200 points and in this moment, this very moment, it is struggling to stay in the green. Clearly, the buyers are there, but they are carefully picking their spots to get back into the game and the sellers are playing right along.
Oh well … This market behavior is nothing new, and, in fact, it wasn’t that long ago we went through the same discombobulating ride.
- This is all looking a heck of a lot like what we saw in early October. Once that train started moving in a bearish direction, it didn’t stop until it careened off the track in mid-October. We’re seeing something similar unfurl now.
That we are, and once this “careening” starts, any errant stone on the track adds to the careening effect.
- The global economy is ending the year in a fragile state with factory activity shrinking in China, euro zone business growth remaining weak, and emerging market giant Russia in a spiraling currency crisis.
China and the Eurozone are known quantities, and I suspect the market is discounting the reality of those two economic powerhouses for now, but Russia, well, that is a horse of a different color, as they say in Oz.
- Russia’s central bank took drastic action to defend its ruble currency in a surprise midnight raising of interest rates by 650 basis points to 17 percent.
And it appears that swift and sudden elevation of interest rates to a staggering 17% did little to stem the carnage around Russia’s currency.
- But despite that the ruble was some down 4 percent against the dollar, having opened about 9 percent stronger, and the dollar-denominated RTS share index fell more than 11 percent.
In fact, the rapid and steep rise in rates might just add fuel to the fire of discontent in Russia, which just might prompt Mr. Putin to back off his aggression in Ukraine and, thus, end the sanctions that are helping to cripple Russia’s economy. Dropping oil prices are the other disrupting agent for the Russian economy, and that will not go away any time soon.
In any case, the market is acting out and the global news is not helping its disposition.
- “These are uncertain times again and there is a risk of another global downturn,” said Stephen Webster, chief European economist at 4CAST.
True, these are uncertain times. I would ask the question, however, when are they not “uncertain” times in the world.
The issue is, of course, global economic conditions, but, given the current and future performance (suspected performance) of the US economy, I am less concerned about the global economy, as the US has now, for some seven decades, led the world out of (and into) any economic doldrums the world is experiencing.
Make no mistake, the pain from the 2009 financial debacle in the US crippled the world and only now is it finally coming out of it. On top of that, the US and the world are also moving through an economic, social, and cultural upheaval the likes of which we have not seen since the Industrial Revolution and the period just after World War II.
Yes, indeed, these are uncertain times, but of one thing I am certain – as long as the US is improving economically, the world will follow.
Trade in the day; invest in your life …
