I spoke to a friend on the phone last night and he said "well that was an interesting day, wasn't it?" He was refering to the market action for Thursday.
My reply was "we'll know how interesting tomorrow," meaning Friday. Foreign markets have all rebounded today. A lot of them have done worse than the US in this sell down but I think their fall has been an over reaction vs. their respective fundamentals.
I think the fundamentals in the US are shakier than abroad but I do not think things are catastrophic here. Obviously weakness in the US has the potential to affect other countries.
The US market looks to open a tad higher. Given the hope I think is being expressed on CNBC I think this is the type of start that could fade during the day. I would love to be wrong and see the market have a calm slow move up that is just enough to put some distance between the 200 DMA.
I'm not sure a manic panic up today is the best thing that could happen for the longer term health of the market (but it would be nice for the weekend).
Did Doreen just say that the market is reacting to future events instead of current news? Isn't market always discounting possible future outcomes?
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2 comments:
"A lot of them have done worse than the US in this sell down but I think their fall has been an over reaction vs. their respective fundamentals."
And what is it that you understand of the fundamentals of these economies that makes you say that?
1) Demand for resources continues to help those countries.
2) Many Asian markets have healthy surpluses
3) GDP growth in all the countries, even the deficit countries , is very strong.
4) Inflation, relative to the history of emerging markets is quite low.
5) Even the weaker countries will see internal growth and spending continue.
6) Countries that are not now considered investment destinations will become investment destinations and draw foreign capital.
None of this guarantees anything but these are some of the underpinnings. We have seen that short term market sentiment can be more important than anything else and there could easily be more down side to come. The postive case is what it is and you can decide for yourself whether it matters, I think it does.
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