“Buy the rumour, sell the news.”
This is what the market has been doing the past few weeks. Many North American companies have reported fantastic quarterly results, however, once these results were released, in many cases, the stock sold off sharply. This has left investors quite confused. Why has the market been falling these past two weeks and what will it take for it to start rising again? Good earnings reports seem to have little effect.
Last year, it seemed like companies on the North American exchanges, for the most part, could do no wrong. Whether they reported earnings that beat or did not beat expectations, it seemed to make no difference. The major North American stock markets were moving higher. At that time, the markets were telling investors that better days were ahead and the stock market was reflecting this. Today it seems like the reverse is happening — no matter what positive earnings are being reported from North American companies, the market is selling off. Has the economy finally caught up to the stock markets levels? Can stock markets not move any higher until the economy improves even further?
In my opinion, macro events continue to set the tone for the broader North American indices. Investors are still fearful of some of U.S. President Barack Obama’s new regulations he has put forward. They are concerned about China and their government’s proposals to slow down the pace of growth in their country and recently they are concerned about the debt levels of some European nations, such as Greece and Spain. These fears unfortunately seem to trump (at least at this time) any positive news.
So what can take this market higher? It is my belief that investors require confidence to move the economy and the stock market above where it is today. They need to believe that things are getting better in the economy, and thus better to be an investor than not. Many would agree that the best time to invest is when things are not perfect, when many individuals are fearful. That time for most was March of last year. However, I believe dips in the stock market as we are experiencing right now affords us the ability to invest at better pricing than we would have seen just a few weeks ago. There are many good quality growth and dividend paying investments that are cheaper today than just a short time ago. Investors should use this time in the market to advantage as these opportunities don’t last for too long.
If you have any questions regarding the above article or are looking for an Investment Advisor to help you with your portfolio, please send me an email at [email protected]. I will be glad to speak with you!
Allan Small is an Investment Advisor with Dundee Securities Corporation, a DundeeWealth Inc. Company. This is not an official publication of Dundee Securities and the author is not a Dundee Securities analyst. The views expressed are those of the author alone, and are not necessarily those of Dundee Securities or Metro Canada.