21 January, 2008

Recession Woes spill into Global Markets

While Americans enjoyed their long weekend holiday, watching New England inch a step closer to NFL perfection, markets in the rest of the world succumbed to US Recessionary pressures and tumbled like dominoes one after another.

In the Great White North, Canada (America's closest economic clone and partner), saw its major Index, the TSX, fall by over 600 points (4.75%). The sell-off was fueled by the Financial and Technology sectors but was market-wide. The sell-off was not limited to North America, markets all over the world closed substantially lower as closing bells in different time zones ended trading Monday.

The selling sentiment was seen largely due to disappointment in the stimulus package proposed by US President George Bush. The $150Billion tax relief plan, designed to spur consumer spending and reverse the trend of slowing US economic growth, is seen by Traders as helpful, but ultimately late. The rolling snowball of slowing growth in the US according to many analysts/economists, is out of control, with a recession in the 2nd half of the year inevitable. As much as been said recently by an analyst out of Goldman Sachs. Markets sold off heavily on worries that this slow down in America would spill over and effect economies worldwide.

A run down of the sell off in major world markets Monday:
Canada down 4.75%
Britain down 5.5%
France down 6.8%
Germany down 7.2%
India down 7.4%
Hong Kong down 5.5%
Japan down 3.9%
Brazil down 6.6%

Recession fears are real and are engulfing all Trader Talk these days, and with that it begs the question, can the minor investor survive? Or is cash the better place to be? I think survival is possible and thriving can be achieved. Investors must be patient, own quality companies, use dividends as a cushion (covered call selling too perhaps!), and look for bargain opportunities.

Now its been well written about how and which sectors perform better under slowing economic growth (Consumer necessities, Consumer Staples, Low Cost Retailers, Beverages, Tobacco etc.) but if everything is falling where can one turn? When is the bottom?

These are questions masses of smaller Investors everywhere are asking themselves and the markets of today aren't giving them many answers, let alone hope. The one beam of light for the Bulls seems to be the Federal Reserve and a potential not only cut, but slashing of Interest Rates. Investors need to keep a keen eye on not of what, but how much the Fed does at the end of the month.

Good Luck.

1 comment:

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