I’ve been getting a bit frustrated with the seemingly unfounded optimism that the talking heads of the market are pushing. It seems the current opinion is that last week was a big overreaction to what was merely some expected news of some slowing sectors of the market and that the global economy is still expanding at a healthy rate. Last week was no big deal. Each time the market has corrected this year, it has more than made up its losses. I’d like to present a more realistic view:
“…the sell-off the past couple of weeks has brought the market back down in line with the fundamentals. ”
“The sell-off the past few weeks is not an overreaction to credit concerns that creates another buying opportunity. It is a reasonable re-assessment of what had been unrealistically optimistic hopes for stronger economic and earnings growth in 2008.”
“A full blown credit crunch is unlikely, and we are therefore not adopting a bearish outlook for the stock market. But credit conditions have indeed tightened. ” –Briefing.com’s Dick Green
What we experienced last week was an appropriate reaction to the frenzied gains we’ve seen over the last few months. What we will be experiencing over the coming months is a sideways to down market with moves in both directions, but a primarily downside bias.
I stand by my view that the trickle down effect of rising energy costs and decreased availability of inexpensive credit will put more and more pressure on consumers, forcing them to begin scaling back on spending. These factors combined with the slump in the housing market will begin to hurt the general market with the non-necessity markets being hit first (retail, technology, home improvement, etc).