Over the last two weeks, the financial markets have had to deal with a number of issues that have caused concern and uncertainty:-
- China's efforts to slow its economy by tightening its short term treasury rate and increasing the amount of reserves banks need to cover outstanding loans;
- Concerns about Greece defaulting on its debt and the effect that might have on the Euro;
- President Obama's $90 billion claw-back tax on the largest banks and his opening proposal at bank reforms;
- A number of significant earnings disappointments, including Alcoa (AA) and Bank of America (BAC); A mixed bag of economic news reports.
All these issues have conspired to create an overall negative sentiment that finally caused the markets to begin to correct themselves this week.
We knew [new regulations] were coming, but the big question is, how will the market respond to a significant change in the regulatory environment?
With all the uncertainty, investors are taking profits to lock in gains from last year. We would suggest all the investors to protect positions where you have profits, while at the same time, recognize that any pull back here is likely part of the process of exiting the whole crisis era we've been in.
Positive news, including a string of better-than-expected earnings reports, improvement in the financial situation in Greece and greater detail regarding Obama's financial industry restructuring plans would help. But downward trend could drag into next week for a few days.
- JK, Lead Associate, SLT
