ICFiles
SOC 2

CPA Website Content

Secure File Transfer Soc 2 starts at $1 per month

Join Us

 

 
Financial Calculators
Financial Calculators
 
Federal Tax Links
Federal Tax Links
 
Financial Terms Glossary
Financial Terms Glossary
 
Cartoon of the Month
Cartoon of the Month
 

Stock Market: Experts Ponder First Quarter Results, Federal Reserve Policies

Stock Market News

May 2012

Buy

Stock Market: Experts Ponder First Quarter Results, Federal Reserve Policies

In April, corporate earnings in the United States, the Federal Reserve’s game plan, European elections and continued resistance to austerity measures in Europe dominated business news headlines. The consensus is that overall first-quarter results in the United States have been good, and most corporate executives see a positive outlook for the remainder of the year. In a few instances – where results have spectacularly outpaced estimates – Wall Street chastised companies for being overly cautious in their forecasting.

Despite a rally that pushed U.S. stocks up steadily 30 percent since October, many experts still see no clear-cut direction as to whether we are in a bull market or a short-term bull run in a bear market. Most anticipate modest gains at best from here on – and many suggest that investors look at small-cap stocks (with market values below $3 billion) that are less likely to have exposure to possible international economic downturns and global market fluctuations. That doesn’t mean that all blue chip companies should be avoided, though. Wall Street experts are suggesting that individual investors stick predominately with U.S. stocks, and are selective about purchasing commodities that could see prices fall if the economy in Europe falters.

On a bearish note, some experts point to an upswing in insider selling among Standard & Poor’s 500 companies – an increase that has boosted insider selling to its highest rate in 10 years. Perhaps this might be a trend worth noting. If corporate insiders are selling stock, it doesn’t inspire confidence in the company’s outlook despite a positive first quarter.

Perhaps it’s worth thinking about how the European elections might affect U.S. stocks. The biggest concern might be that the upcoming change of leadership in theNetherlandsand the possible changes in France and Greece could sabotage efforts made to address the Euro-zone debt crisis. Opposition to the austerity measures supported by Germany is growing. If the new leaders reverse course, Euro-zone nations would be back where they started. More stress on Euro-zone nations’ economies could increase borrowing costs, push some nations into recession and cause stock prices to fall. Despite this gloomy scenario, it is important to remember that economic improvements have made theUnited Statesbetter able to withstand weaknesses in the European markets.  

At the end of April, U.S. policymakers were busy reviewing economic forecasts and determining future monetary policy. The Federal Reserve has kept interest rates at or near zero for four years in order to give businesses and consumers access to cheap credit. Ultra low rates have helped revitalize the stock market and enabled homeowners to refinance their homes and buy goods and services. Critics of the Fed policy believe these are short-term fixes that jumpstart the economy but do not address the real problems of burgeoning trade deficits and a tax code that needs a major overhaul.

Some economists are pushing for the Fed to start backing off the low-interest/quantitative easing policy because the economy is finding its feet. These critics believe that keeping Treasury bond prices high and government interest rates low means easy money, which in turn means elected officials continue to avoid tackling deficit issues and revising the tax code. Observers do not anticipate any major changes to the monetary policy until the Fed gets a clearer picture of the economy.

The bottom line:  the economy and the stock market are in a much better position than they were a couple of years ago. After an impressive 30 percent run-up that began in October 2011, we are back where we were when opinions varied daily on whether the market forecast was bullish or bearish. Now, just as it was then, it’s smart to keep your expectations modest, refrain from knee-jerk responses and maintain an appropriately diversified portfolio.

The above is intended as general commentary only and is not a substitute for advice from professional tax and investment professionals.

Buy

 

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

Protected by Copyscape Plagiarism Finder

Dynamic Content Powered by Service2client.com
SEO Content Powered by DynamicPost.net

ICFiles
SOC 2

CPA Website Content

Secure File Transfer Soc 2 starts at $1 per month

Join Us

 

CPA Website Content

 
 
Financial Calculators
Financial Calculators
 
Federal Tax Links
Federal Tax Links
 
Financial Terms Glossary
Financial Terms Glossary
 
Cartoon of the Month
Cartoon of the Month
 
websites for cpas

MyWeb, WordPress Joomla, Drupal
1 Click Hosting
Install free themes

websites for cpas

Click

 
Tax Calendar
Tax Calendar
 
State Tax Links
State Tax Links
 
Track your Refund
Track your Refund
 
Library Articles
Library Articles
 
 
 

CLOSE