Inflation at 17 year high - is this rally coming to an end?
Answers
653 points
DaveDiggz answered 3 months ago …
It's funny, it's like everybody is ignoring the fundamental data out there and only looking to the price of oil to decide what to do with this market. If oil is dropping, the market is rising and vice versa.
Ultimately I think it'll come back to bite everybody in the butt. If consumers slow their spending (which they have), this economy will slide right into a recession. And while over the short term the market is simply a voting machine, over the long term it's a weighing machine...the weight of this economy will eventually make the market drop.
677 points
Dragonsbane answered 3 months ago …
Inflation is at a high right now, but it is decreasing as most of the price pressures have been coming from the commodity sector (which is now collapsing). So the market is basically ignoring high inflation numbers now, as they expect it to decrease significantly going forward. However, I have to concur with DaveDiggz. The fact that the price of oil is collapsing is a bad thing, not a good thing. It's telling us that the US is going into a recession (if it's not already in one). People buying this rally thinking the bottom is in are going to get their heads handed to them. Personally, I'm fading it.
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732 points
alanj answered 3 months ago …
Actually, a continuing of lower oil prices would be a good thing. A look at the price charts will show you that as oil has come down in price so have commodity prices. Lower prices in oil would also eventually effect manufacturing costs in the form of lower fuel costs in the manufacturing and transportation of those products. Lower costs to the manufacturer would result in lower costs to the consumer. This would result in more purchasing by the consumer. Which would result in more growth, which is a good thing. That said, oil is not going to continue down. Right now it is oversold. Two areas of resistence is $110 a barrel and $100 a barrel. And when oil starts heading back up the market will head back down. Of which it is very close to being overbought. I'm with Dragonsbane. I'd be fading this market. And when markets fall they usually fall faster than when they went up. Also the VIX is getting low ( below 20) in comparison to it's lows on a 1 year daily chart. This is an early signal for a possible reversal of the markets.
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2703 points
MNSL answered 3 months ago …
I think present volatility will prevail in the market however there will be rally in the forth quarter of this year. The S&P 500 index at least will appreciate by 10%. Some sectors and companies will benefit most especially neglected sectors.
It is premature to tell market direction beyond 2009. However, some markets will recover at the end of this year and beginning of next year. Some sectors and companies will outperform markets through out the world.
We will see bear market or side way markets for most assets in the next 18 months. During recession and in a slow economy there will not be demand for luxury items including consumer products. People spend carefully through out the world now and one example is less fuel consumption and less use of cars as mode of transport
Gradually, Inflation will come down due to fall of oil prices and commodity prices. Many industries will benefit and gradually employment will increase and demand for product and services will increase.
People have some main priorities now: how to pay their mortgage and how to spend their money for essential things such as food, education and health. It is common all over the world now. Even they are not sure about their employment now.
Still global investors have opportunity to accumulate fundamentally sound stocks through out the world. When we invest in any type of markets it is better to think safety of margin now. .
Today we get different types of investors in addition to different types of instruments. As a result of this sometimes it is very difficult to get investment decisions by looking at volume and prices. It can be changed suddenly surprise to many. Sometimes we can not apply demand and supply theory as well.
US dollar will appreciate against euro, pound, Yen, AUD, NZD and some currencies in the next 12 months at least. Commodity currencies will hit hard in the next 02 years. They will begin to rebound again in 2011.
Finally we can see direction of the commodity market in 2010. If world economy is in stable position I think next commodity Bull Run will begin at the end of 2010 or beginning of 2011.
Before that we will have excellent investment opportunities in other neglected sectors and beaten down sectors such as financial sector, hotel, tourism and airline sector At present we must be selective in our investment and we must not follow the crowd. Global investors will benefit most in the next 18 months and beyond.
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