Stock markets declining Watch
For the last day or so, this has been in the news constantly.
BBC: Recession fears weigh on markets
FT: London shares struggle in volatile trade
FT: Asian markets plunge for second day
Reuters: Stock market rout fuels U.S. recession risk
Reuters: Recession risk as British bills come due
Are you worried about this? Do you think it's just a temporary slump or the sign of something?
Seriously though, no, not good news. I think the next few years will be interesting ones.
I do think it is temporary, but how do you define temporary? I don't think this slowdown will last for more than a year, US consumers are too materialistic to worry about their debt for longer than that
I'm really looking forward to finding a job in the middle of a recession when I graduate lol.
A temporary blip I think, the world economy is growing too fast due to the birth rate to have any real negative effects on demand. With people living longer as well there needs to be the services and products there for them.
No offense but how over simplistic is that?!?!?!
More people + people living longer -> increased product and services demand -> stronger world economy
Personally, I think that the US is heading towards a recession. We've already got bear markets in some countries; China and India's exchanges are more reliant on the US than previously thought (look at recent % drops on the exchanges and the currencies against the USD!); and I expect further profit warnings ahead, which will tip the US over the edge.
You see, stock market traders (well at least me and the savy ones) knew this was going to happen. We knew that there would be a big January slump, so post christmas we changed our position from bull to bear treading. Nearly always before christmas there is a bull market (stocks rising), and after christmas there is nearly always a bear market (slump); and when there are presidential elections (as there are now) plus difficulties in the market (as we saw in 07) this slump is virtually guaranteed to be bigger and more rapid.
Furthermore, in response to this slump, the news corporations release articles like the ones you've highlighted, and various other "scare mongering" articles, which causes panic selling. Panic selling = even bigger drops in the market. In fact according to Channel 4 News, yesterday the market dropped the most since 9/11.
Why am I overjoyed? It's simple: profits. I made huge profits out of yesterdays drop, it was the most profitable day trading I've seen in a long while. Not only did the profits come from shorting a panic market, but also my hunch on NRK paid off, thats twice NRK has given me a healthy bonus.
So what are we likely to see now? Well let's consider the fact that prices are low, and also consider the institutionalists. Institutionalists have to trade on the market, they have no choice, plus prices being low make stocks an attractive purchase. So we're likely to see a lot of institutionalists buy into the market while prices are low, which therefore means that demand increases and subsequently so does price, especially as institutionalists control a large portion of the market. Therefore, sometime soon we should expect the market to make at least some recovery. As for the long term, it all depends on the US economy. All the world stock markets are impacted by the US stock market, and the US stock market is impacted by the US economy. If the US government does not do anything to improve the state of the US economy, we are likely to see continued volatility in the markets, and ultimately a disasterous effect on businesses and the markets in general. However, if the economy improves, then we are likely to see growth in the global markets, which will be in everyones benefit. Therefore, I think it will be highly unlikly that the US government does nothing.