The Biggest Issue for the Market Today Right now, data coming out of Europe indicates a potential slowdown. It looks increasingly likely that the lack of GDP growth and the potential for deflation in Europe will require more aggressive action by the European Central Bank. Additionally, as a result of Putins action in the Ukraine, there is the rising concern that economic sanctions could effectively start a trade war that would add to the weakening GDP picture in Europe. Add to this the rise of ISIS in the Middle East which could destabilize oil production. On top of that we have a growing panic of Ebola, a weakening Chinese economy, and if that were not enough, Ben Bernanke let his former colleagues at the Federal Reserve know that mortgage lending standards have become too tight. Despite all these shocks, the market is less than 5% off of its highs that were hit in mid- September. Why Are Stocks Still Looking So Good? The reason is twofold: First, corporate earnings have been relatively strong with companies like Caterpillar (CAT) and Microsoft (MSFT) surprising to the upside. Second, the European Central Bank has signaled they are actually going to leave the ghost of potential inflation in the past, not self-destruct, and start to be more aggressive in stimulating their economy.
Posted on: Tue, 28 Oct 2014 13:46:57 +0000
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