With long list of problems facing the economy, markets typically came without a good host’s show off to welcome the new President-elect Barack Obama. As soon the market came out of election focus and came out very quickly, reflects clear picture how investors see the recent news and data of the economy.
The economic parameters signaling more impounding pressure as Oil sank nearly 8 percent to around $65 a barrel on fears of lower consumer spending also more companies cutting their quarterly and full year forecasts, latest to join a like of technology bellwether Cisco system as downgraded its yearly guidance due to prevailing US crisis and important to note that Cisco reported this just after the closing of day’s market.
With the employment report on private employers cutting large number of jobs, markets feared job-loss figure to worsen on Friday when the Labor Department issues the payrolls data, as businesses find unable to protect their profit margins with high expenditure costs and no option left to increase in prices, thanks to globalization that brings in the price wars to compete with extremely low cost producers like China. So the businesses start adopting rather simple approach to reduce fixed costs in form of jobs cuts.
For investors neither company nor sector/industry appears that left immune to even sustain their projected growth. Witnessed the investor bankers demise, now lenders appears extra cautious as none appears worthy of financing, also the acute liquidity shortage has left the economy, weakened and starved of capital. The fear that the liquidity deprived frozen credit markets gave way to recession has shattered the confidence. This is a great challenge for President-elect Obama to start working closely with his economic team to bring back the confidence in US economy.
The hope that comes with a new presidency still present but overshadowed due to fear and uncertainty, also election day rally on Tuesday and two day consecutive rally last weekend already absorbed the positives of newly elect-government. Further the fall or rise in uncertain markets like these always remain more volatile due to the herd mentality. Investors must wait and watch and also do more study and research before making their moves and keep close tab on the government policies towards economic stability.
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