Awaiting the US stock market mood swing

By Covestor

In September, the Dow Jones Industrial Average retreated 1.47%, the S&P 500 fell 2.64%, and the Nasdaq dropped 3.27%.

For the third quarter, the Dow lost 7.77%, the S&P 500 gave back 7.11%, and the Nasdaq declined 8.1%.

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As the year progresses, it is becoming more apparent investors are in an unforgiving mood.

US Economy

The domestic economy continues to meander along with 2% to 3% GDP growth.

Quarterly fluctuations have been all over the map, which is why there there is variance in the results.

Last quarter’s GDP growth rate was revised upward to 3.6% (from 3.4%), as were consumer spending totals.

Slowdown

The third quarter number is expected to drop to 1.7%, so slowing growth appears to be the current consensus belief among economists and investment banks.  

If one considers the fundamentals for growth important, the U.S. economy has plenty of well known strengths.

Rock bottom interest rates, relatively high consumer confidence and spending figures, moderate job growth, and solid corporate profits are all part of the equation.

Corporate Earnings

Yes, there could be some slowing in the profit area, but balance sheets remain strong and flush with cash.

This year should be a record year for transactions of all kinds (mainly mergers and acquisitions).

With commodity prices on their deathbed (many down 50% or more from their highs), it appears the crucial consumer portion of the economy will be strong for the foreseeable future.

Housing

Naturally, each industry has it’s own unique prospects. Housing looks in good shape, and so does the financial services area.

Energy probably still needs another six months or year to start the recovery process.

Still, the major question is why are investors in such a foul mood?

U.S. markets have had a particularly difficult time of it over the last few months.

Fed Action

Fear of lift off, the Fed raising interest rates, was the conventional reason given, until that was postponed last week.

Yet, investors continue to see the glass as half empty. Wall Street is notorious for being a fickle place.

Part of navigating the financial landscape is by being opportunistic when others see nothing but trouble.

Mood Swing

Yes, the dour mood with respect to stocks may continue even through the end of the year, but at some point, market mood will change.

The question is when and what might cause sentiment to swing?

Photo Credit: Dominic Alves via Flickr Creative Commons

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