Market manipulators see a pessimistic outlook from speculators. There is a large decline on the last trading day of week. Traders are very cautious of further decline and rush to close holding positions regardless of profit or loss. Institutional and individual investors are relatively calm since portfolio has high cash level.
Since recent market top, capital money is slowly flowing out of the equity stock market as market participants do not have confidence in stock performance. Household investors do not want to be the last to exit in case of a market collapse. On the other hand, wealthy investors are less worry of market collapse and continue to hold blue-chip stocks that can provide decent dividend return. This provides support to general market despite trader speculation and negligence from individual investors.
“Weakness and Turmoil” Are Good for Stocks: David Kotok
"The market looks at weakness and turmoil and says 'more LTRO or something like it in Europe...the Fed on hold [and] will stretch it out longer,'" explains David Kotok, chairman and CIO of Cumberland Advisors. "Every time there's a shock, it means there will be more global QE. That's what markets celebrate."
"There's an argument in favor of a repeat [of 2010 and 2011] but we don't agree with it," says Kotok.
He sees instead a continuation of slow growth, low inflation and low interest rates, a highly accommodative Fed and strong corporate profits. That environment "can go on for several years" and is potentially very bullish for stocks, says Kotok.
"Bear markets set the stage for the ensuing bull market," Kotok says, suggesting the stage is set for yet more gains to come.
Reasons To Be Optimistic About America
The Daily Ticker headed to Los Angeles this week to cover the Milken Institute's annual Global Conference where many of the world's most influential investors, economists, CEOs, innovators and policymakers met to discuss some of the most imminent and dire problems facing America and the world.
Niall Ferguson
Professor, Harvard University
"The thing that makes me optimistic about the United States is technology and the ability of the United States still to be at the cutting edge. But of course that is quite geographically localized. That is a Silicon Valley story."
Mitch Daniels
Governor, Indiana
"The resilience of the American economy over time. We still give birth to more new businesses than other places [and] that we still have a core of innovation."
Richard Fisher
Dallas Federal Reserve President
"We are growing our population. We have an enormous Hispanic population that's coming in. We are still the magnet for anybody that wants to work hard in the world. And we create, and we innovate, and we are masters of creative destruction. As long as government won't interfere with that adjustment, and let the American genius go to work, we'll win."
U.S. Chose Better Path to Recovery
Last summer, things looked bad on both sides of the Atlantic. There were fears of double-dip recessions, and stubbornly high unemployment rates. Stock markets swooned.
In Europe this week, a meeting of finance ministers trying to negotiate details of how banks will be forced to raise capital — and whether some countries can require their banks to have more capital — produced no agreement but provided more reasons to doubt whether the banks are safe. In the United States, the Federal Reserve’s quarterly survey of lending officers indicated that lending conditions were improving.
No one factor made the difference in the divergent paths the two continents have taken. But there are two — both related to financial conditions — that were very important. In each case, it appears that the United States did a much better job.
The first one concerns the banks. The huge bailouts, started in the administration of George W. Bush and continued by President Obama, worked. The banks were bailed out, and the survivors were forced to recapitalize.
The other area where American policy seems to have worked better is monetary policy. The Federal Reserve’s purchase of large amounts of securities — known to some as quantitative easing — was critical in restoring liquidity to American banks and making it possible for them to continue lending. The European Central Bank avoided disaster with its own program to pump cash into banks but, as two Morgan Stanley economists, Joachim Fels and Elga Bartsch, noted this week, that move was “not a circuit breaker that transferred risk from the private sector to the central bank’s balance sheet.” It has bought time, but fundamental problems remain.
Perhaps such fears are inevitable after a financial crisis. But as of now, there can be little doubt that the American government handled the problems of the last year far better than did its European counterparts.
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