6 Biggest Unknowns Facing Investors Today
BusinessWeek asked stock market experts to identify the biggest unknowns facing investors today. The result was 6 key questions that will have to be answered before the market can return to any sort of upward trend.
1. Will the Market Lows Hold?
Last Thursday November 13th all three major indices fell below critical support intraday (NASDAQ 1500, Dow 8200, S&P 850) before staging yet another huge rally to close up overall. While some investors are optimistic that investors will continue to buy into weakness others can’t help but wonder if we will inevitably go lower, much lower.
2. What will President Obama do?
One debate has been resolved, and that is who our next President will be. But with a new President comes a new administration. It will be interesting to see if our new President can walk his own talk and really bring our economy out of its current calamity without making matters worse.
3. How bad will the layoffs be?
Unemployment continues to rise at record levels which only continues to hurt the US consumer and the economy. In October the unemployment rate jumped from 6.2% to 6.5% and economists are expecting a continuous rise well into 2009.
4. How happy with the holidays be?
“Stressed out by the economic headlines, stock market losses, falling home values, and a precarious job market, consumers seem in no mood to spend during this holiday season. Nearly every retailer has lowered sales expectations.”
5. When will the hedge funds stop selling?
Many investors are pulling their money out of hedge funds, mutual funds, and similar investment vehicles. Hedge funds trade heavily on margin though which intensifies any losses and more often than not stirs more uncertainty. With thousands of hedge funds currently involved in the market investors wonder how many will be closing their doors in the next year.
6. What’s the next turn in the credit crisis?
“Every market expert has a different opinion on what the U.S. Treasury, the Federal Reserve, and regulators and central bankers around the world should be doing to resolve the global financial crisis. The biggest unknown may be whether—and when—they are ultimately successful.”
Ben’s last comment is spot on, “With so many unknowns continuing to make investors very uneasy, wild daily index swings are likely to keep our heads spinning.” Market volatility this extreme is only prevalent during bear markets. Many unknowns are currently being unraveled and with history as our guide it may only continue to get worse.
Source:
The Six Unknowns That Are Roiling The Stock Market
BusinessWeek
Ben Steverman
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