The Financial and Capital Markets
Without a clear fundamental catalyst to set speculators in the pursuit of yield or fleeing from a potential financial crisis, the market is left to its own devices. It seems in this period of ‘down-time’ that the risk appetite has established a clear trend. However, this advance has developed within the boundaries of much more influential levels. Therefore, risk appetite is allowed to appreciate (or risk aversion allowed to deflate) market values so long as it doesn’t take the critical step to establish a new and consequential trend. As such, advances in the Dow Jones Industrial Average and crude among others have occurred without a meaningful realignment of risk tolerance. This is a discouraging theory to adapt to the rebound in 2009 as it suggests a reversal is simply a bounce. To truly reestablish a bull trend that enjoys notable progress over a number of years, a number of hurdles will have to be overcome. The very basis for a recovery in markets is first and foremost the responsibility of economic activity. Beyond expansion’s influence, the rollback of government stimulus, the burden of extreme fiscal deficits and the availability of credit (leverage) are critical obstacles to deal with. In the meantime, more immediate and global threats like China actively cooling its markets, Greece’s ailments spreading across Europe or even ill-placed regulation could impact the markets in the near-future.
