Why stocks may go up despite negative global cues
In this issue:
» Bernanke needs to pay heed to gold
» China's inflation could get out of hand
» US Fed is still in denial
» Telecom to see a wave of M&As
» ...and more!
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So, while it is obvious that all is not looking too well with the global economy, the global equity markets have painted a different picture. Equity markets have, in fact, rebounded sharply since mid March. So why have stock markets performed well despite so many negative factors? There could be several reasons for this. For one, governments in the West are throwing money at their problems at an alarmingly brisk pace. This has led to liquidity increasing. As a result more and more money is finding its way into equities. That's not all. Since interest rates in the developed world continue to remain low, there is not much incentive for investors to invest in other asset classes.
Also, investors seemed to have priced in many of these negative cues. In fact, some of the concerns are not looked upon as significant risks. For instance, not many perceive high oil prices as a worrying factor unless it touches the US$ 140 a barrel mark. Reconstruction in Japan is expected to be positive for the global economy as investments there increase. Again although company earnings are not likely to be sustained at the strong levels seen in FY10, they are still expected to be on the higher side. All this has therefore sparked interest in global equity markets. In India too, interest in stock markets has revived after inflation concerns and prospect of low corporate earnings dampened sentiments last year. While volatility could still persist in the Indian stock markets in the near term, the Indian growth story in the long term remains strong and strengthens the case for investing in good quality stocks for a longer horizon.
Do you think stock markets will rise despite negative global cues? Share with us or post your comments on our facebook page.
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We believe that Bernanke would have been a lot better off had he heard what the gold prices were telling him. Over the years, correlation between gold and US CPI was indeed quite a strong one. The relationship though broke down in 2006 and not because of any fundamentals, but because of random changes that were made in the CPI. Hence, it is time Bernanke starts listening to the price of gold rather than base his decision on the wrongly calculated CPI.
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03:35 |
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Roach states that the US Fed is still in denial over the role that its poor monetary policy decisions played in creating this "monster" crisis. And Ben Bernanke is not doing much to quash the problem. He is rather adding to the mess. Externalities like Euro debt crisis, the Middle East problems, Japanese natural disaster etc. happen from time to time. Nothing can be done about it. But, the US needs to look within and see what problems it can fix in its own backyard. These include consumers and businesses repairing their balance sheets. Policymakers need to be careful on how they deal with current budgetary expenses and not overdo it. We along with Roach believe that the US government should be more like the ant than the grasshopper in Aesop's Fables. The ant spent the summer looking for food, while the grasshopper lazed around. And you can tell who had food and comfort during the harsh winter months. The US needs to save some ammunition in case it gets into another 2008 like mess.
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At the moment, India is divided into 22 service areas. And there are about 9 to 14 mobile-phone operators in each of these areas. According to the existing rules, operators cannot have more than one license in an area. As a result, they cannot buy out rivals that have operations in the same service areas. Given the stiff competition in the telecom industry, many players are facing severe pressure on the margin front. If the new policy does relax M&A norms, it will augur well for the big telecom players.
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Today's investing mantra |
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5 Responses to "Why stocks may go up despite negative global cues"
shrishti sunil
Apr 13, 2011I totally agree with the view points...Adding on to it, most of the indian investors they actually dont know abt the market facts and figures..they just invest b'coz they see others investing into the market. If the oil prices go down it wont effect them or change their opinion abt investing in the market.the purchasing power of people is high and so they put on their money into the market..
baltari
Apr 13, 2011I believe Indian stock markets will definitely go up during second half of this year if the planned Lokpal Act is really passed by the parliament as it will mean a start for the reduction in political & beurocratic curreption which is responsible for sluggish investments in vital sectors of our economy.
Rakesh Sethi
Apr 12, 2011As regards why market is moving inspite of negative news in the market. Certainly I will be accept your views, apart from that in Indian Market, you are well aware of the facts that, final result going to start and expected excellent nos in ahead against the last, secondly we have seen a purchasing power have been increasing of Indian which is resulted more and more buying in the market by way consumer good, article, house hold, Cars etc. which ultimate reflect in the Result of the Company, thirdly INdia is a great potential in the next 30 years and a lot of infrastructure project are coming which ultimate require of Power, Cement, Steel. Crude is moving but I think that this is a past, people do not worry about the Crude and they are investing in capital market, real estate and other avenues, which can deliver a good return.
vijay viragi
Apr 12, 2011The situation is almost similar to that of 2007 sub prime crises. Every thing is going up, Agriculture commodities, Gold, Silver, Property, Equity. I have One question which has been bothering since Lehman Brothers collapse. Does the Printing of Money solve the Economic problem? If YES then why should we worry. Just start printing more and more. If NOT then why are Governments doing this ?
kamerkar
Apr 16, 2011MARKET WILL MOVE SLOWLY SLOWLY SOUTHWARDS.
DUE TO VAST FORIGN INFLOW SHARP FALLS AVODED TILL NOW.