My two cents on the markets today:
One of the indices I watch on my Bloomberg Terminal is the VIX, colloquially known as "the fear index." What the VIX measures is somewhat complicated, but I'll try to keep it simple: Essentially what the VIX measures is the expectations of volatility in call and put index options on the S&P 500. The theory goes that if people expect the S&P 500 to go sharply upward or downward, the are more likely place higher premiums on put and call index options. This means the buyers and sellers of those options are uncertain about what expect, hence high levels of volatility. The higher the number, the more volatile the market.
The VIX over the last five years:
The president's remarks caused quite an increase in expected volatility. Know why? Because the markets understand that the president offered nothing in the way of measures that would stimulate economic growth over the near and medium term. Traders don't understand where cyclical equities are headed United States isn't going to take the fiscal measures that are necessary to get the economy going in the right direction. Add in factors like coming austerity measures and a debt crisis in Europe and investors are deeply uncertain about whats going to happen. When investors become uncertain, they know where to run: Treasury bonds and gold. That means money runs away from cyclical equities that are more sensitive to economic downturns, hence driving down prices and bringing down weighted indices like the S&P 500. You saw a lot of that today, for example. The MS Cyclicals Index got absolutely hammered today, down 9%.
It is down 16% for the year.
You don't need a BT to follow any of these things. I also use Yahoo Finance which is a pretty cool tool for getting a broad overview without getting too detailed. There will probably be some upswing as cooler heads prevail and look at fundamentals. That is until we see what Q3 GDP looks like and we wont know that until October. I'm expecting a downward trajectory, personally. As well a revision of Q2 growth...downward. My feeling that consumers are bracing themselves for the worst with all this talk of cuts and no talk of jobs.
I know the President came out to calm the markets. That's cool. More focus on serious growth measures was the way to go, not extending things that are already in place but aren't working. But austerity measures and deficit cuts?
That's not the move, sir. Not the move. Kinda why I was saying the other day....go big.