Six Unknowns Roiling the Market
After weeks of exasperated volatility, even long-time market observers are baffled by what’s against us for stocks. The general future is too uncertain
By Ben Steverman
The stock market’s carriage is downright strange lately. Professionals with decades of market experience scratch their heads as the market falls to its lowest point of the year, then surges almost 7% in an afternoon—all in opposition to no apparent reason.
What’s death by the halter over the pedigree market these days is uncertainty. In an environment where few know what’s next, investors are fickle, corporate executives are cautious, and government officials are trying anything and everything to stabilize the situation.
BusinessWeek asked stock mart experts to identify the biggest unknowns facing investors. These factors will be crucial to clearing up a misty view. Unfortunately, it could select months—if not years—to resolve them.
1. Will the market lows hold?
On Nov. 13, the broad S&P 500 pointer and the tech-heavy Nasdaq composite dipped to their lowest points of the year. The Dow Jones industrial average got be concluded, sliding below the solution level of 8000. Then, however, buyers flooded the place of traffic and all three indices jumped more than 6%, mainly in the last 50 minutes of trading.
Randy Frederick, Charles Schwab’s (SCHW) instructor of trading and derivatives, points abroad that this has happened roughly four times in the past pair months: The market keeps returning to its lows, then rebounding. "It’sitting actually an encouraging sign," he says. "The jeopardy is if we immerse one’sitting self below that."
Traders who rely on technical analysis—that is, vigilance the stock market’s past patterns to predict future moves—could be unnerved by a significant send down below these levels. "That’s when things will dispose spooky," he says.
2. What wish President Obama do?
The victory of Barack Obama on Nov. 4 settled one unknown. Investors know who will be President on Jan. 20, 2009—they’re just not doubtless what he’s going to do.
"You receive a new administration coming in, and nobody knows what the new rules are going to be," says James Reed, portfolio manager of the UMB Scout Fund (UMBSX). Hanging in the balance are efforts to stimulate the economy and extremity the credit crunch, taxes, health care policy, and new regulations for the financial industry.
"It will be interesting to see in the president’session first 100 days how plenteous of the changes he advocated can be implemented," says Richard Sparks of Schaeffer’s Investment Research.
3. How bad will the layoffs be?
In October the U.S. unemployment rate rose from 6.1% to 6.5% and the consensus is that it will continue to struggle up. But how far and how fast?
Many companies have announced work at jobs cuts in the past month and the emergence of 2009 may be a crucial period. Firms are putting together budgets for nearest year, Reed says, and he’s expecting "whopping layoffs in the first quarter."
The unemployment rate is "the key data point that everyone is watching," says Steve Neimeth, portfolio manager at AIG SunAmerica Asset Management. If the rate moves above 8%, consumers could slash their spending, and the household recovery more hope to see in 2009 could have existence delayed, he says.
4. How pleased will the holidays be?
Stressed out by means of the economic headlines, stipe market losses, falling hearth values, and a precarious job market, consumers seem in no vein to use up during this holiday season. Nearly every retailer has lowered sales expectations.
"Expectations be favored with been set very low," says Frederick. Holiday spending that beats the gloomy estimatescould boost deal out in small portions funds and the market because a whole.
