cheongwee, there is cause for optimism ... if the European leaders can really gel together and come up with a credible plan to resolve the crisis.
You can see the U.S. stock investors think it is going to happen. In addn, the US past days’ economic data, and McDonald’s Corp. profit are really good news. That's why the Dow climbed 267.01 points, or 2.3%, at 11,808.79.
The intuitive, commonsensical assumption is that there is an extremely strong positive correlation between macroeconomic performance and the stock market
Currently, the Dow at 11808 and the STI still below 2700.
The US stock market and in particular the Dow, must be one of the best performing markets in the world this year. Just look at Europe and much of Asia by comparison. Can anyone explain the contrasting performances?
The US economy, although not in recession has certainly not been outgrowing Asia this year. Admittedly, many of the Dow component stocks do have multi-national businesses that are benefiting from growing revenue in Asia and other emerging markets, which continue to show impressive GDP growth.
Yet this argument does not really hold up well either because emerging markets' stock markets have performed poorly this year despite the continuing growths of their economies, while the Dow is up for the year.
This just shows that the correlation between the marcoeconomy and the stock market, although certainly a positive one for the most part, is not always as strong as many people assume, at least in the short run. The net sum of an unquanfiable, indiscernable, complex factors that come into play when determining short term stock market pricing is often beyond our intuitive, commonsensical logic.
u made a good point. the best approach is still to do bottoms-up analysis. look for the stocks that are best suited to your investment time horizon & your risk appetite, and ignore the overall market and economy. there are sectors that will just grow as per normal like construction in industry (becos of the massive HDB building programme).
My friend said he want to buy reit, but i told him there will be a time when the yield ave close to 20% like in March 2009, he laugh.
Ok, we see, if my prediction and analysis is right, we will see this happening soon, by 2013.
Patience is the key.
cheongwee, cheer up. Overnight, US stocks cheong-ed again. I think Europe is looking brighter -- it reached an agreement in principle on a bank-recapitalization plan.
to quote a fund manager: “We fully believe the euro zone does not have a death wish and will come up with a constructive plan by next week,” when the G-20 group of major industrialized and developed economies meets.
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