The above was the headline in the Wall Street Journal this morning. The article goes on to discuss the curtailment of capital spending by many major corporations that are sitting on large amounts of cash. The companies are reducing their investments in equipment, buildings and software. Previously, these types of investments helped pull us out of the recent recession. The article indicates that these large corporations are worried about the fiscal and economic uncertainty they face. If large companies are worried, small companies must also be worried! How about consumers? It was reported on Saturday that retailers are seeing consumers cutting back, making retailers worry about sales during the holiday season. This all seems to be rather negative news. With this as a backdrop before the opening of Monday’s stock market, you might think the market would plummet. You would have been wrong. The S&P 500 went up over 1.5%! In any stock market correction, the price of stocks decrease to a point at which buying becomes stronger than selling. This can last for a short time, generally 2 to 7 days, followed by a resumption in a downward direction. The past couple of weeks have taken a toll on the stock market, putting it in a technical “oversold” position. This rebound has been expected. Sometimes the news is reporting facts that the stock market has previously built into pricing. The “big deal” is still the Fiscal Cliff. Late last week, when the president and congress were seen as working together on this issue, there was a sense of optimism that they might resolve the looming problem. As I noted in my blog “The Fiscal Cliff!”, the issues are difficult and will require a great deal of compromise to resolve. Compromise is not something that comes easily to Washington these days. We can continue to hope for the best but, as with the large corporations, keep our money secure!
I would like to take this opportunity to wish each of you and your families a very Happy Thanksgiving!
Ed Mallon
