We believe there is a simple answer. Right now there are just too many outside influences and external factors playing on the collective emotions of market participants. Here is what the last month or so has sounded like:
- We will default on our debt if the debt ceiling isn't raised.
- Greece is saved...no it's not...it's saved...maybe not...
- Germany is going to leave the Euro.
- Italian banks are in big financial trouble.
- The Fed is going to do this...the Fed is going to do that...
- The US economy is slowing down.
In over 20 years in the business, I have never seen such market interference and involvement by governments on a day to day basis. One government leader states one thing, another government leader says another, and then our government leaders say something completely different. Until this dynamic changes, we should expect more of the same. The longer the dynamic continues the worse it is for the capital markets and world economies.
The good news is that eventually, when all is said and done, the global markets will eventually move in the direction they intended to go - which unfortunately in our opinion may be lower, as the increase in volatility is making investors more nervous and economic data continues to show a slowdown in global growth. Just this morning the ECRI stated on CNBC that its indicators were saying the US is heading into another recession. And this group has been very accurate in the past. The video clip can be viewed by clicking on the link below.
http://www.businesscycle.com/#
It our opinion it is best to continue to be defensive oriented and wait until there is more clarity on both the government involvement as well as economic front.
