Marc Cuniberti: Markets react ‘violently’ to Feds
Since the Federal Reserve held fast on rates and decided again not to increase their base rate, the markets have reacted violently, up one day and down the next.
The moves have been pronounced and investors looking for some calm after the Fed meeting were sorely disappointed.
Off the lows of about 15,300 on the Dow a few weeks back, it has gained about a 2000 points or so only to oscillate back and forth, giving investors hope one day then trashing them again as gains evaporate the next.
One would think the lack of movement on interest rates by the Fed would have led to a prolonged rally and although we did get a rally, it was indeed short lived and quite bi-polar.
Now investors are left wondering what is next both in the markets and with the Federal Reserve.
The Feds next interest rate meeting is later this month and with the same uncertainty we had prior to the last meeting, one could argue little has changed.
Wanting to provide market stability and avoid a possible sell off by keeping interest rates where they were, the Feds have apparently just prolonged the uncertainty.
Round and round we go with the Feds and we are again left wondering when they will raise rates, a familiar theme it seems.
With the budget limit once again in the news and China still struggling, uncertainty is about the only thing that IS certain and these radical market movements are reflecting that uncertainty.
Technical analysts point to the historical precedent that hints the Dow may have to test its recent low again and dip down into the mid 15,000’s again, and only then will it be cleared for lift off. This is only one view of course, while others believe a sustained upward movement is fast approaching.
As usual, market prognosticators never agree, much like our politicians with each having a distinct opinion of what should and will happen.
To be sure, with the Chinese economy convulsing and the US debt limit up for grabs, add in the recent implosion of the Brazilian currency and some large Brazilian corporations (www.zerohedge.com<http://www.zerohedge.com>) and one could argue economic conditions are far from ideal for the markets to run upwards and instead possibly search for new lows or at least revisit the recent low during last month’s trouncing.
Some analysts are going so far as to hint that more QE might be in the cards for the US but with threats of increasing interest rates on the front burner, it would be a far stretch of the imagination to believe the US Fed Reserve will do an abrupt about face, and not only hold rates where they are but double barrel the problem with another round of QE.
More QE is ongoing in Europe and in Japan as we speak, and China also has a seat at the QE table initiating its own version of “save the markets bacon” with the printing presses.
With so many cross currents, it’s no wonder investors don’t know which way to turn.
Until some of these questions get answered and some issues resolved, a sustained movement in any direction is probably not in the cards but then again, I, like the rest of the world, cannot call market movements for certain one way or another.
Much like a stopped clock being twice a day, I CAN say the markets will go up, down or sideways in the days and weeks to come and it’s truly anyone’s guess in this most difficult market environment.
If you’re wondering just what to do with your investing portfolio, in times of uncertainty, a well-diversified portfolio with some cash reserves can at least reduce some risk. After all, the cash portion won’t go up in an up market but it won’t go down in a down one either.
When in doubt, cash is often thought to be the safest place to be.
This article expresses the opinions of Marc Cuniberti should not be construed or acted upon as individual investment advice. Mr. Cuniberti is an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Marc can be contacted at MKB Financial Services 164 Maple St #1, Auburn, CA 95603 (530) 823-2792. MKB Financial Services and Cambridge are not affiliated.
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