Traders and market manipulators pushed market down after president election. Despite a significant drop in broad market index, market participants are not selling in panic. Institutional and individual investors are especially calm while day traders are selling in a herd. Although market has dropped below the level when long term investors took profit before the Federal Reserve announcement of open-ended MBS buying program, there is no symptom that long term investors are taking profit again on market fear.
Since institutional and individual investors are waiting for market bottom and long term investors are still patient on market, day traders will finish selling soon. There is much speculation on market swing. The outlook for market is strong because of ample liquidity and low interest rate environment. market participants can make use of this opportunity to strengthen the portfolio for short term trading or long term appreciation.
Awaiting the End of Uncertainty? Don’t Hold Your Breath
A well worn adage about Wall Street suggests that markets can adjust to almost any circumstance, as long there are no surprises. "We don't like the idea of higher taxes," investors often say, "but we can deal with it (within reason) as long as you leave things alone after that."
Not only will any changes in the balance of power in the House and/or Senate have a major impact on the tone and outcome of lame duck session negotiations to address the fiscal cliff, but would also completely alter the agenda of the first two years for the next President.
Add in another election in Greece on Wednesday that could rekindle fears of a Eurozone breakup, as well as the start of China's 18th National Party Congress on Thursday, and it's conceivable that worries from beyond our borders could begin to intrude upon investors again too.
So as much as tomorrow's voting is set to mark the end of some uncertainty, if you're expecting markets to suddenly move into the HOV-lane and burst higher, you're sure to be disappointed. Politics are clearly a factor, but ultimately, it's earnings that matter most to Wall Street.
Beware of 'Trap Door' for Stocks: Pro
Investors should brace themselves for a sharp drop in stocks following a rally that started in June and moved towards a peak following the announcement of a third round of quantitative easing (QE3) in the United States, David Murrin, CEO at Emergent Asset Management said on Tuesday.
"There seems to be an assumption that because of QE3 and a program from the ECB that there is no downside risk to equity markets. If you look at leading stocks and the way that the S&P and the Dow have been trading there is the risk of a trap door to the downside and that's something people have ignored." Murrin added that he was skeptical about U.S. equities' ability to continue rising.
"I have a downside bias and in my opinion you should sell corrections to the upside. I think the downside could be very aggressive. People are very biased to the upside and have been complacent when it comes to Western stock markets," Murrin said.
Obama win has U.S. investors staring at fiscal cliff
U.S. investors will hit trading floors this morning with the same president and the same problems in gridlocked Washington. First up: a looming budget crisis that could send the U.S. economy reeling.
Steven Englander, Citigroup's head of G10 foreign exchange strategy, said markets could panic toward yearend if it looks as though no deal is imminent to avoid the fiscal cliff.
If that happens, investors will think twice about lending the U.S. government money at low interest rates, which would strain the economy, widen the deficit and hurt the dollar. It also raises the possibility that major credit-rating agencies will cut the U.S. debt rating.
Why US May Be Headed for Another Recession
All the problems investors face-from a fiscal meltdown to the various economic woes around the world-add up to one daunting prospect: Another possible recession just over the horizon.
As the financial world puts Tuesday's presidential election behind it, the light in the tunnel could be an economic freight train.
In the week prior to the election, investors pulled cash both from stocks and bonds. Equity-based mutual funds lost $1.4 billion while bond funds saw outflows of $895 million, according to Lipper fund flow data.
Continued accommodation from Federal Reserve monetary policy has been the antidote to fear of risk.
This week's market drop "does reflect real worry about the fiscal cliff" but "we view this as anxiety as an opportunity to buy, not sell," said Bernard Baumohl, chief global economist at the Economic Outlook Group.
"We have a situation where the range of outcomes is extremely wide," he said. "What that tells me from an investing standpoint is that we have to be fully diversified right now. I would not be taking concentrated bets across any asset class."
For Baum, the most important thing for investors to watch is not letting their emotions overcome their choices. He thinks Washington will come to a resolution that, at some point, will placate markets.
"You can't keep kicking things down the road," he said. "Once you get more certainty you get markets that will react and act more like markets, as opposed to emotional roller coasters."
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