Just to follow up on my last post, I continue to remain skeptical on the advance in the markets of late. While I believe the U.S. economy and stock market are attractive over the next year, I am cautious in the near term because I believe the markets need to sell off and consolidate the gains we've seen so far this year; remember, stocks don't move up in a straight line, they move both up and down, and trying to understand and forecast these moves is they way to prosper and grow an investment account.
So that being said, here are some reasons why I believe the markets are vulnerable at these levels in the short term:
- the increase in the price of oil (yesterday it rose to $105 a barrel - you will begin to notice how this will affect the price of gas)
- the geopolitical tensions in the Middle East, most notably between Iran and Israel
- the economies of China and India, both of which are very important to overall global growth are starting to look that they might be slowing
- the massive U.S. budget deficit and how the politicians in Washington can't seem to come together to address this problem
- the seesaw action between the Republican presidental candidates and how the uncertainty who will get the nomination now favors an incumbent president (remember I'm not saying I like or dislike Democrats/Republicans or anything like that, I'm merely saying that history has shown that the markets have performed better when Republicans have the majority in Washington)
So, after writing about all my concerns regarding the short term prospects for stocks, I'll try to write about something more upbeat!
