Filed under: Forecasts, Housing, Recession
Yesterday, the market had a swing of over 900 points as indexes hit new lows for the year and then pushed upward to close 6% or so higher. Overnight, markets in Asia and Europe staged rallies of their own.
The stock market may march up for a while, but that can’t be sustained and the odds are likely that it will crash and make new lows again before year’s end.
The fiction is that the markets trade based on what they see six months into the future. Perhaps they see GDP recovering by then. Not a chance.
George Soros said yesterday that there is some chance that the world economy will enter a depression next year. That may be extreme, but a majority of business leaders and economists who want to be heard on the subject state that this is the most significant downturn of their lifetimes.
There’s a view that falling housing prices are at the core of the disaster that has overwhelmed the financial structure of the country and is now hurting everything from retail sales to tech company revenue. Housing may be helped by government programs, but if unemployment hits 8% or superior next year, the number of people who have to give up their homes could rise sharply. Lower interest rates do not help people out of work.
Another misconception about the future is that oil prices will continue to fall. With some OPEC nation’s facing budget deficits due to crude dropping from over $140 to $55, the cartel will have to cut production to meet demand. That might mean a massive cut, but OPEC can match the drop in the global need for oil with a paltry supply.
The stock market has not stopped going down.
Douglas A. McIntyre is an editor at 247wallst.com.
Why a stock market rally can’t be sustained originally appeared on BloggingStocks on Fri, 14 Nov 2008 09:15:00 EST. Please see our terms for use of feeds.
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