How low have we gone? Are we running so badly at this moment in time as a global economy that any news that isn’t bad news automatically gets translated as good news? There is an expectation among investors that the financial indicators of this week are weak, even bland, but better than expected. Perhaps such a sentiment could spur investors into loosening those purse strings and that won’t be such a bad thing at all, even if the results themselves weren’t something to thump your chest over and go to town singing songs of glee.
It’s quite clearly a case of once bitten, twice shy. Investors that have already been burnt once really don’t want to see any of their money evaporate into a lot of nothingness a second time around. The brunt of this has been borne by stocks globally as indices went into freefall and equities continue to show the beating in faith they have taken. Governmental bonds in the US and Europe continue to stagnate despite rates being lower than ever. As indicators of global economic recovery fail to come forth, the economic machinery continues to slow down and uncertainty still looms large with nothing alleviating concerns.
Indeed, faith in the bourses was tested earlier on Friday given Ben Bernanke was due to make the Jackson Hole speech. As it was, Bernanke was subdued in his optimism (what little of it there was) and as Intel’s acquisition of McAfee was viewed negatively and reduced earning predictions were released, share prices of the market leading chip manufacturer tumbled. These initial losses were offset though by those looking to pick up shares of the bellwether while it was on the cheap (relatively speaking). This sentiment then spread across the board and all three of the big ticket indices ended Friday on a positive note, covering week-long losses with ease.
Even so, a majority of American and global indexes ended up contracting yet again and it was only the Shanghai’s B share market that bucked this trend and that was only because speculation was rife that it will be merged with the larger and more imaginatively named A share market. The current economic outlook is at best bleak and indicators are really testing whether there is any market support to be had at all. If significantly lowered expectations can be bettered, you can expect a short term rally to give investors something to sing about.