Malaise is starting to set in for stock market participants. There’s too much uncertainty out there and no one really has a strong sense as to where the stock market is headed. It looks like everyone is waiting for the Federal Reserve to offer some comfort.
I think a quarter-point interest rate reduction would be the best move the central bank could make under the auspices of helping a slowing economy. I don’t think we should get more than this because the dollar would suffer greatly and inflationary pressures would increase. Don’t forget: the price of oil is around $77.00 a barrel. One of the world’s most precious commodities is causing inflation and this is bad for the long-run health of the economy.
So, if you’re an investor with money in your account to speculate with, it is difficult to make the case for taking on new positions right now. Nothing is really happening until the market gets direction from the central bank. You could describe the current stock market action as quite boring.
Not until we get into the fourth quarter can stock prices really accelerate. My best guess is that the stock market needs a boost from the central bank and third quarter earnings season to put the current credit worries behind it. Most people agree that the bad credit issues should correct themselves and that there shouldn’t be any help from the government. Regardless, the stock market needs a new set of issues to occupy itself in order for stock prices to accelerate.
I’m following a lot of new, interesting companies right now, but their stock prices aren’t doing anything. Really, the subprime credit market precipitated a lack of confidence in the marketplace and this is now the reason for the market’s lackluster performance. Time is our best ally and I really look forward seeing how the stock market reacts to the Federal Reserve’s next meeting.