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As a whole, ever since the turn of the year, markets have been bearish, with investor confidence incredibly low. With factors ranging from Russia’s exertion of influence in the Crimea, to tensions along the Korean border, 2014 has been the year of risk aversion. This, however, is no longer the case, with stocks starting to gain momentum and futures flying high. So, if this is the case, why all the doom and gloom?
April’s Data and Cause for Optimism
Although Russia’s annexation of the Crimea undoubtedly (and correctly) sent shockwaves through the markets, much of the original market tensions have subsided here. The issue remains that although April’s figures are broadly good, much of the optimism is failing to seep its way through to investors who are still adopting risk aversion strategies in spite of the opportunities that are consistently arising.
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In fact, just this week, we saw good PMI readings from a variety of European countries (excluding France which was the only outlier) and all major European economies scored above 50 in the manufacturing and services PMIs, thus suggesting that all economies were growing rather than contracting. As a whole, it would be fair to conclude that the Eurozone is currently exceeding expectations, with long term stagnation being replaced by growth. For those using an ECN account’s charting software, it may be wise to track this PMI chart, looking for developments and trading opportunities that could be exploited in the long term.
It appears as though, in spite of the positive economic outlook, investors still remain wary of continuing stagnation, with forward looking signals showing that investor confidence remains low. At present, figures released from across the globe are positive without being remarkable – meaning that the numbers aren’t blowing people away – suggesting that stagnation is expected for some time yet.
Tech Stocks Recover Alongside Data
To coincide with this, we have also seen a noticeable improvement in technology stocks throughout April – something that has definitely re-instilled confidence in investors. Such a recovery has been driven by Apple and Facebook both exceeding expectations, providing a few ‘investor friendly’ announcements about share buyback and a seven-for-one stock split.
Although this year has been an arduous one for investors who have become weary of massive valuations, this good news from Apple and Facebook was exactly what was required to re-instill confidence among market participants, driving a volume in trades.
Looking Forward, Boosting Confidence
Both the PMI figures and the announcements from Apple and Facebook could not have come at a better time for the markets, with the economic data in America expected to improve again now that the poor winter weather has subsided. All things considered, it appears as though now is the time to end the doom and gloom in the markets, as we seem to be due for an incredibly good second quarter. This, of course, is dependent on the situation in the Crimea not escalating but, with a certain amount of geopolitical risk already priced into the markets, it appears as though it would take a significant shift to significantly hit the markets once more.