The Psychology Of The Market, What It All Means
This time its different,the caveat is it is different psychologically, fundamentally it is the same.
If you are disciplined enough to take the emotion out of things, the objective reality is that the market trades fully valued before rates goning up and as earnings per share growth sputters to a Stop, out of gas (momentum).
Since last October I have written about and am sticking with low return expectations for Y 2015 based on the downshift in EPS growth estimates which do not support high returns.
That remains true now, but with the erosion in market psychology, one must allow for the possibility that Y 2015 may produce a negative return if that EPS growth trend is not revised higher in the wake of uplifting economic data. And that begs the quest, what uplifting economic data.
With the recent events and the perceived and promoted uncertainty surrounding the US Fed’s monetary policy, the buy-the-dip strategy that was embraced without question over the last several years is no longer infallible market dogma..
In that respect, this time things are different psychologically, but fundamentally things are the same.
Valuation and earnings trends always matter. As it is now, the former is full (even stretched in many instances) and the latter is empty. Not a comforting combination, it becomes more worrisome when market psychology is strained.
Financial market history tells up that the 6-month period beginning in November (the Santa Claus Rally) is often a good period for the stock market. That could be the case again this time around or it may not.
What we learned from the FOMC statement Thursday, is this: what happens in the global economy will have a lot to do with the outcome. If the global economy does not pick up, revenues, earnings, sentiment, and the stock market will continue to run parallel to it and faith in monetary policy support will continue to flag.
Have a terrific weekend.
Paul Ebeling
HeffX-LTN
The post The Psychology Of The Market, What It All Means appeared first on Live Trading News.