15 April 2021
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EU mistakes again

Peter Switzer
21 May 2010
Stock markets are sent to test us and the ordeal is made worst when Governments and politicians trying to save their skins get in the way. Overnight Wall Street had its worst day of the year.

And investors were worried about a German vote on the European rescue plan and the US Senate was to vote on its financial regulation bill.

To make matters worse, there were options expirations which always heightens activity in either direction.

Circuit breaker

The S&P 500 and the Nasdaq lost around four per cent and a serious, positive circuit breaker is needed and fast.

That academic pariah Nouriel Roubini, has tipped a 20 per cent fall in stocks but as always he’s talking up his questionable credentials for big calls.

I hope he’s wrong again but as I say, we need a circuit breaker.

Questions marks

This is the correction that I often referred to as a possibility, given our big bounce back since March 2009 but I underestimated the stupidity of the EU Government, which is at the epicentre of this earthquake on global stock markets.

Credibility of governments to support the global economy is raising question marks over bank’s balance sheets and this is raising doubts about a global recovery, which hurts share prices big time.

Ironically the economic story in places such as the US and even Japan are actually on the improve but the trouble spot is Europe and until they take actions to build confidence then shares will be under pressure.

Rates movement

If some decisive actions comes next week, this share sell off might be arrested, as great value has emerged with quality stocks but we’re again in challenging waters. I wouldn’t want to go to an election in this sort of environment.

By the way, if this continues the next interest rate movement from the Reserve Bank will be down. 

 

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

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