Uncertainty kills the Stock Market
Uncertainty kills the Stock Market-
A bad unemployment report adds to it. There was no surprise. The economy has been stalling for sometime. Various indicators and reports pouring the doom and gloom for several weeks. Retail sales, consumer confidence, home sales and manufacturing reports have been lackluster lately. After a three month of optimism we are again descending into the era of economic malaise. This has been the history of this recovery, if there is anything you want to assign a name to as “ recovery”. It has always been start and stop and start again. Fears of double dip recession and a constant worry and a state of non prosperity and mental dejection.
Starting early this year it seemed like all the cards counted we are on a faster track of recovery. But just 3 months into it the party started to fade. First there were war drums and threats made against Iran that jacked up oil futures from low 90 to 110 dollars a barrel thereby catapulting gasoline prices in North America above $4 and harking the consumer with another economic obstacle. Since the GDP is about 70 percent of consumer spending it blew the very first thing: Consumer Confidence which collapsed since February 2012.
As the consumer confidence plunged so did other dominoes. Tighter wallets never bring spending but a choke hold on GDP and hence the GDP fell this month to a mere 2.2 percent growth. Following that more threats and more war drums resoundingly got oil prices stuck to an unbearable $4 a gallon in very fragile economy and the recovery started flagging. The signs were everywhere.
Employers were again thrown into an uncertainty and turbulence not sure if they should hire more or just postpone hiring. Under conditions of uncertainty and an threats of war few people react positively. Companies tightened their budgets and outlooks and started postponing hiring. That showed up in less than stellar jobs report in March which added fewer jobs and April followed with a mere 115,000 jobs added.
Stock market also likes certainty and an optimism to work in a healthy manner, otherwise it will do what the chart shows one red candle after another and volumes to the downside. The market is selling off, buyers are nowhere to be found and short sellers are all having a field day all to themselves. The job report killed the market and now we are in a side ways movement if not the down trend yet.
Unless an balanced mixture of economic certainty and air of prosperity is generated under a proper leadership in Washington there will be no progress on the economic front. Human nature works well when there is some certainty and a known outcome and optimism of ones future that the things would be there tomorrow and what it may bring. Human nature does not works well in constant shifting sand and threat of wars and uncertainty.
The people trying to run for the office and wanting to get re-elected are ones who need to understand the correlation between certainty and prosperity in relation to wars and mayhem. You have to chose either of them and not both at the same time. It cannot be multi tasked and worked out that way. Human nature has not changed in 100 years and nor would the financial markets and those who make a living off it.