Confidence has to return slowly so that people reverse the psychology of the last 2 weeks. Many lasting impressions were made this week. Many who now have "hard" losses, and paper ones as well. People won't be as reckless with their investments, and overall, that's probably a good thing.
Steve, People do forget pretty quickly. If the market rallies for a 2 or 3 days, the money on the sidelines will go chasing the stocks that are good long term holds. Just like October 98, the drops will be a distant memory. This is not much different from that drop. That one was just as scary. I remember seeing lots of selling everyday, everywhere!
The interest rates are still low and inflation is tame. With the drops in the markets, the economy may be slowing down anyways. Greenspan and company don't want people to think they are done with the interest rates but I doubt we will see the hikes most are forecasting once the April economic data is released in May----unless of course we are sitting at Nasdaq 5000 at month end. <ggg>
Money for margin calls will eat into spending patterns. The wealthy probably spend a lot more than their fair share and may hold back a little.
No wonder AG was targeting the stock market. If the stock market is hit, the spending drops (no inflation)and there is no need to raise interest rates. I don't believe his public remarks about not targeting the market. I don't believe the idea that rate hike have nothing to do with the market. I bet their private conversations among themselves are much different from what they say publically and that is very understandable.
Again, I think mending in the market can be pretty quick just as the corrections have been. If the mending does happen at 3500 or so, one would think that funds will deploy their cash to beat the rush into stocks, just as there was a rush to get out of stocks. If a rally is very realistic for year end (which i think it is), there will be a race to time this market before it moves up significantly. I am betting funds have a lot of cash on the sidelines this month. |
