Why Put Money In This Market?
10/03/2014 12:01 am EST
MoneyShow's Jim Jubak examines the current market environment and has several reasons why investors may start to buy.
For the week ahead, watch to see whether you can find anything that might provide more energy for a market that feels like it's winding down. Right now, the market seems to be behaving like a windup toy. You wind it up and wind it up and it goes bang-bang-bang-bang-bang and the monkey pounds on the drum really vigorously. Then, as the spring gets looser and looser, it slows down. That's what it feels like where we are right now. It feels like we've run out of gas. We've run out of tension in the spring. When you really need something, you go back into it.
Right now, all we're doing is—in terms of the big stock indexes, like the S&P—we're just bouncing around where we've been, slightly lower, no energy there. Every day there's some challenge to make us move a little lower. The Russell, which is the small-cap index, however, has actually fallen through to a 10% correction. No reason the big-caps have to follow it, but again, we're looking for something that would say we'll put money into this market because the more that we see stuff going down, the more there's a lack of action. You get a kind of self-fulfilling prophecy. People look at the market and go, “Oh, okay, I don't see any reason I need to put money in. I won't put money in.” Therefore, the market falls.
Looking ahead, what could we see that would provide some kind of rewinding of the spring. We could see it from earnings. Earning season starts on the 8th of October. We could see it from some unexpected event from the European Central Bank which meets on October 2. We could see a diminution of some of the global terror that we've got out there, whether its war actually between Ukraine and Russia, or war in Syria and Iraq, or the problems in not war, but the mass demonstrations in Hong Kong.
All that seems to make it feel like the world is not moving forward. Those are negative events, a reason not to put money in. We've got all those negative things but their simple ending would provide fuel to the market. We could see something from earnings. It doesn't look like, in the short-term, we're going to see much in the way of good news from China, Europe, and Japan on their basic economy. That's where we're stuck. Right now, we've had a lot of money move into the US because of fear over the rest of world but that only takes a market so far and it feels like, well, that's as far as we're going to get right now without some good news that we haven't seen so far.