Why Ho-Hum Trading is on the Horizon

Other than the flowers, there isn’t much to get excited about right now. In other words, don’t expect much from the stock market over the near term.

It’s no longer earnings season, so the stock market will be disproportionately affected by economic news. Everyone’s focused on the slowing housing market.

I have to say that I am surprised by the strength in oil prices at this time. Some view this as a good development, as higher oil prices are supposed to discourage consumption and thereby contribute to lower inflation. It seems as though the stock market has just accepted that oil prices will be over $60 a barrel. It wasn’t that long ago when oil was trading at $25 a barrel.

Institutional investors are kind of cranky right now. Nobody really knows what the economy is going to do, and nobody knows what the Federal Reserve is going to do either. Of course, institutional investors don’t like uncertainty. All of this is contributing to the current market malaise.

Barring any major geopolitical event, I repeat my contention that only the Federal Reserve will be able to light the fire under the stock market this year. Corporate earnings are still very good, but they aren’t growing enough to provide a catalyst for stock prices.

Most people expect the economy to slow, commensurate with the weakening real estate market. So, all we have left to count on is interest rate policy — and the central bank doesn’t have much room to move. It can’t risk any inflationary policy, so. at best, a quarter- point rate reduction is all we can hope for this year.

If this happens, I do think stocks will close on a positive note by the end of the year. In the interim, I think we’re going to see ho- hum trading.