This article points out that stock market volatility is back, which is a sign that the powerful rally that started in early March may be coming to an end. The Dow Jones rose and fell more than 100 points in seven of the past 12 days. The reason for this volatility is simple. Investor anticipation of an economic recovery played a large role in the stock market's advance over the last eight months, but recent economic indicators have been sending mixed signals, leading some economists to predict a double-dip recession and others to forecast a recovery as steep as the decline.
As Dan Deming, a trader with Stutland Equities, says, “it is a psychology that drives a big chunk of the market. This is not a typical year, and we've seen huge gains. People are looking to take risk off the table, and looking to get out of the market.”
2 comments:
Personally, I feel people are overreacting to what is going on in the stock market. Obviously the amount of money I have tied up to the stock market is insignificant compared to most of the people that do have these concerns, but the trend has always been that in the long run, most stocks will experience growth. However, it does not help when people decide to sell too quickly and the incentives for good, but premature results from mutual fund managers does not help either. Especially for people that are invested in the Dow, I think there needs to be a little more patience. There is no way that one cant expect this recession to be resolved in just a year.
I agree completely with Brandon's argument - I think that there needs to be more patience with the market. There is a lot of uncertainty with what is going to actually happen and people are just confused about what do to which is contributing to volatility. Although investor anticipation of an economic recovery has played a major role in the stock market's advance over the last eight months, recent economic indicators have sent mixed signals. As mentioned in the article, psychology plays a major role in the market. This previous year was not typical, and if consumers just have patience I think things will work uot
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