Bad news = decline

Happy weekend everyone! And happy birthday to my mom!

In a recent blog post I said that it would be interesting to see how the financial markets responded to the next piece of bad news. The reason was that there was a lot of mixed news hitting and the response from investors was also pretty mixed. That to me looks like behavior associated with uncertainty. If folks were confident in the direction of the economy then they would be investing regardless of the news flow. Instead, people are letting the news dictate their choices. That smells like uncertainty, wouldn’t you agree?

Evidence to the contrary would be folks plunking down cash even in the face of bad news. That’s why I felt it would be telling to see how investors responded to genuinely bad news. Enter: the European Union’s bad economic data. Market response: bad. What that tells me is that the majority of investors are still nervous and…uncertain (there’s that word again). What’s more, there have been optimistic signs of, not just economic bottoming but, recovery. However, right now pessimism has descended…in more ways than one.

My assessment therefore is that we are still in this bottoming phase. And what that means is that it is still a great time to be checking out prospective investments.

I hope that the extended weekend is relaxing and rejuvenating for all of you!

Jason