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Archive for September, 2013

Will the US government sort itself out?

Sun, 29th Sep 2013 Leave a comment

Chart of FTSE-100 at close on 27th September 2013The FTSE has been drifting lower in sympathy with the Dow since the one-day surge in response to the non-taper. It looks like it could settle in the 6450-6500 range for a time, while the US sorts out its budget and debt ceiling wrangles, then bounce.

Chart of Dow Jones at close on 27th September 2013The Dow hasn’t reacted that strongly to the US government wrangling, so, presumably, the market is expecting a resolution which means that things could get shaky if we don’t get one. The Tea Party element of the Republicans really don’t like Obamacare and are looking to force a delay in its implementation, but I don’t think there is much public support for shutting down the government, which is what will happen this week if they don’t agree to the President’s budget, so I think it likely that a deal will be done. Personally, as a pinko liberal European, I don’t see what is so terrible about providing health care to poor people, but apparently the Republicans feel that it is a socialist infringement of individual liberty.

The next stumbling block is the debt ceiling, which will be hit in two or three weeks time. Again the Republicans want spending cuts (like abandoning Obamacare) in return for agreeing to raise it. Given the potential consequences of a government default, again, it seems likely that a deal will be done.

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No taper yet!

Thu, 19th Sep 2013 Leave a comment

Chart of FTSE-100 at 19th September 2013 Well, not many people saw that coming! The Fed decided yesterday that the US economy was not strong enough to start the QE taper, so everything (except the dollar) has shot up overnight. The FTSE is up 90 points so far today, but I’ll still be surprised if it breaks out of its 6000-6800 range. I think the euphoria may continue a little while, but once the market has thought about it, we may go back to a mindset where bad news is bad news again. Recently bad economic numbers have been welcomed as making the taper less likely, but, now that Mr.  Market has got used to the idea of the taper, I suspect that concern will return to the strength of the recovery.

Chart of Dow Jones at 19th September 2013The Dow hit a new all-time high last night and I think it could reach 16000, but I don’t expect it to stay there very long. I think the FTSE could be back at 6000 within a couple of months, but as it is not correlating well with the Dow at the moment, I wouldn’t like to predict where that would put the US index. The Fed also reduced its forecasts for the economy yesterday and, in time, this may have a negative effect on the stock market.