The Fear of the Stock Market Slump
Investors are scared by what the US Financial Markets may do next. Below are 5 reasons we should see the markets rally into the new year.
1. The market is undervalued. The deep sell off in the markets has left many quality stocks looking “cheap”
2. The VIX just hit an all time high. What is the VIX and what does it do? Basically, the VIX measures volatility in the stock market. Many investors refer to it as a fear gauge. The higher the number, the greater the fear. A very high level is used by many contrarian investors as a buying opportunity.
3. The government is doing everything it can. One of the reasons markets has dropped is due to the lack of credit available. This freeze up of credit hurts business’s revolving credit, keeps homebuyers from getting a mortgage, and keeps banks from giving loans. We are a nation of credit. When the credit market is frozen, the individual consumer has trouble purchasing products.
The Federal reserve as been adding dollars to the credit market to unfreeze it. As this continues to happen, investors will begin to realize that the consumer can continue to use credit on a daily basis.
4. Sellers are disappearing. Many of the talking heads in the financial media have been saying the Dow Jones Industrial Average needs to go below 10,000 before the market can go back up. Well the Dow just did that. The markets are starting to, basically, run out of sellers. No one wants to sell stocks at this level as they believe the markets will recover.
5. The changing of the guard. Presidential Elections for the last 60 years have been bullish for stock markets. Typically the sitting President uses the resources at hand to try to put a positive spin on both the economy and stock market. The hope is that good feelings will keep the sitting party in power.
While I could make the above list much longer list, the above give you a few examples at what a institutional investor is looking at right now.