None of us will ever forget the horrendous scenes witnessed on September 11th last year, something that we will hopefully never see again.
Whilst the human cost of the tragedy was vast, the initial financial impact of the event was, whilst significant, far less than that which had anticipated in the period between 11 September and the markets reopening on 19 September.
Talk to anyone, and ask them what they expect for the global markets for the next twelve months, and you will be hard pressed to find someone who has an optimistic view of things; most people are expecting more of the same
David Butler, chairman, Global Trader 247
The Dow Jones industrial average, perhaps the best barometer of the global markets, was off "only" 600 points on that day. To put this in context, in two days towards the end of July of this year, the Dow rallied over one thousand points from its lows.
In fact whist the market subsequently fell a further 700 points over the course of late September, it then staged a rally bringing it far higher than the September 10th closing levels; indeed above 10600. As we approach the first anniversary of this tragedy what can we expect to see in the markets, will there be any sympathy sell-offs?
Prior to September of last year the global economy was looking very precarious. Since then, there has been a slew of bad news emanating from the US and Europe too. Virtually on a monthly basis we see a different economic horror story or accounting scandal that knocks the market down another percent or two. How much more of this can we expect? One must think that after nearly two years of bad news and a bear market, we must soon be at a turning point? This is where I believe the market currently stands.
Talk to anyone, and ask them what they expect for the global markets for the next twelve months, and you will be hard pressed to find someone who has an optimistic view of things; most people are expecting more of the same. This is a classic time for the market to turn unexpectedly. But why would this happen? What would bring about this change in trend?
Firstly, we have seen 11 rate cuts in the US, since the Federal Government took the initial unexpected move cutting rates at the start of 2001. Rates are now at 40-year lows. Economic theorists tell us that rate cuts take twelve to eighteen months to take effect. Hence we should only now be starting to see real positive economic effects of this significant adjustment in liquidity.
Secondly, we have the 14 August deadline in the US for CEOs to swear off on their financials. Whilst this is very much a token gesture, it still will serve to reassure the beleaguered investors that financial America is not continuing to pull the wool over the poor investor`s eye.
Hopefully, however amongst all the bad news of the previous two years, the optimists have always had one underlying rock to hang on to; the seemingly unassailable resilience of the US consumer
David Butler, chairman, Global Trader 247
Thirdly, with so much bad news out there, as highlighted above, this has now become the "expected" or norm, as opposed to the exception, so once again the technical situation of the market supports a rally.
So following 11 September, what we are going to experience? My sense is that, as people adopt a patriotic stance in the US in terms of both the War on Terror anniversary and the potential for war against Iraq, together with the positive factors highlighted above kick in, indeed a rally will ensue. Will this be sustainable? Hopefully, however amongst all the bad news of the previous two years, the optimists have always had one underlying rock to hang on to; the seemingly unassailable resilience of the US consumer. If they can hold continue even throughout these very tough times, any rally should be sustainable.
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