Sunday, April 17, 2005
Silence Is Golden?
Odd, since it seems like just about any faction could make use of the info. Liberals could use it as evidence of the ineffectiveness of the current tax policy. Republicans might call for further tax cuts to provide additional stimulus. Fiscal conservatives would point out the current account and trade deficits and point to those as possible causes. But no one seems to be taking the bait.
So with no expert independent opinion available, and certainly nothing of substance from the mainstream media, we're left only to guess at the significance of the recent market events. First is the possibility that we're headed towards another slowdown, as the stock markets are often a "leading" indicator. Could we be headed towards a recession? Quite possibly, which would be really depressing considering that those of us here in the midwest never quite experienced the last recovery. Is it just a slight adjustment, an acknowledgement that the run-up in last '04 wasn't justified? Maybe. Is the market finally reacting to the precarious situation that we've found ourselves in, with record trade deficits and no real effort from Washington to reign in spending? I bet there's a bit of that baked into it.
Regardless of the reasons, this coming week will be critical. Any sign of weakness on Monday will cause the market to dip below 10,000, and my guess is once that happens, we're going to see a new bottom for the market. Where that might be - 9500? Lower yet? - remains to be seen, and there's a chance that the market will simply rebound to the 10,500 area if investors see stocks as underpriced on Monday.