Central Planners To Exploit Greed & Fear In Second Half
Today, a new month, new quarter and new half of the year commences. A lot has happened on the markets over the past six months, and surely, as we approach the supposed end of an era on December 21, 2012, central planners will be out in full force to exploit investors’ fear and greed. That a deal was struck between leaders in Europe to stabilize eurozone credit markets and convince the world european solidarity among banks has staved off panics. But, as employment numbers remain dismal in the United States, and Europe posts record jobless numbers in the second half, volatility will continue to define markets.
On Thursday, the European Central Bank will meet on its monetary policy, and many are expecting that the central bank will reduce its main refinancing to a record low 0.75%, after having kept interest rates at 1% since January.
The premises on which a bullish second-half rest are precarious. Declining gas prices, for one, are no guarantee, as a 9.4% increase in the oil price on Friday signals considerable upside. Further, commercial hedgers have moved to less short positions, reaching levels they haven’t been at since October, just about 5 months before oil peaked at $110.
Although volatile, stocks have had a positive first half. Since the start of the year, the S&P 500 (SPX) has jumped nearly 5%, the Nasdaq (COMP) has rallied 9%, and the Dow Jones Industrial Average (INDU) has gained 3%. This despite the euro crisis as well as declining job reports out of the United States. The same is on the Agenda for the next six months, as US, Spain and Italy debt problems will continue to weigh on the headlines. Moreover, the west still aims its sights on Iran. The 5-year trend – a certain decline – is sure to continue on into the second half of the year.