The news is pretty grim and there is a lot of liquidation going on in the equity market. I can imagine that the only people making any money in this market are those who are any good at trading S&P 500 Index futures. And the global coordination of the current financial market turmoil is a real sign that investors are expecting a serious, worldwide economic slowdown.
Investment risk remains very high and we’re in one of the climates where anything can happen to a financial instrument. There is a lot of cash sitting on the sidelines right now and some institutional investors are adding to their positions in their core holdings. There will also be a lot of tax loss selling, so we can expect a really tough climate for stocks until the end of this year.
The declining price of oil is a real help to the economy, acting like a tax cut for all consumers. I have to admit that I’ve been surprised by the weakness in gold prices. The trading action in spot gold has been so negative recently that investors aren’t buying the commodity as a safe haven. You know you’ve got a serious crisis of confidence in the marketplace when gold falls commensurate with equities.
Jim Rogers is still advocating a resurgence in commodity prices, but he freely admits that he is often early with his calls. No, the markets are still in confidence crisis mode and investors have basically rejected all the actions taken by policy makers.
Investors have weighed the actions of the Federal Reserve and government and they are betting that these actions just won’t do much to help. So, all we’re left with, then, is a market that continues to correct itself. The bloodletting isn’t over.