The North America stock markets seem to be waiting for the Federal Reserve announcement at the end of their meeting on Wednesday before they decide whether to resume their moves higher or not.
The expectation of many analysts is that the Fed will inject about $500 billion worth of stimulus into the American economy over a defined period of time. Many investors believe this stimulus has already been factored into the stock market’s performance. Anything more or less could move the North American markets higher or lower depending on how the Fed makes their announcement, as well as how it is interpreted.
Could the stock market be set up for a let down? Is the stock market’s behaviour over the last week indicating that anything less than a big stimulus announcement from the Fed could cause a pullback in the equity markets? We have seen many positive signs over the past few weeks, from better economic data both here and in the U.S., to fantastic third quarter earnings and future guidance by many companies.
However, this market seems to have stalled at current levels and have not moved higher. My view is that it won’t move higher until the Fed finally provides some clarity as to what they will do moving forward. If you consider the Fed’s stimulus announcement and the U.S. midterm elections both occur this week, it’s no wonder the market has not really done much as of late.
Over the next week, there should be some more clarity with respect to stimulus and politics and that should allow for the equity markets to resume their move higher in the final two months of 2010.
Today, as an investor, I believe it’s important to continue to take profits where possible and continue to look for investments that represent good value. The market will probably be quite volatile during the final two months of the year, but if an investor can maintain a disciplined approach to investing by purchasing cheap investments and selling when a target is reached, I believe they can still make money even during these difficult times. In my opinion, an active management style is how investors should be managing their investments at this time.
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 asmall@dundeesecurities.com. 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.
