There has been a lot of exciting stock market news updates in the last few weeks. Since the start of the new year many markets and indices have suffered from up and down swings as a mix of good and bad economic data has left investors uncertain. For example, imports to China are rising. However, debt data suggests that local Chinese governments may be submerged in bad debt. In the United States, economic growth appears to be gaining momentum, but jobs remain scarce. This mix of data has left investors uncertain of which way markets will head in the near future.
Major Stock Market News Headlines
So what’s causing all of the turbulence in markets? The market has grown jittery with a mixture of good and bad news rolling in. Concerns over the U.S. fiscal situation and on-going negotiations over debt and spending, in combination with a stagnant job market has left many investors skeptical about the American economy. On the other hand, economic growth appears to be picking up, companies are reporting strong profits, and the U.S. even managed to post a budget surplus in excess of 50 billion dollars in December.
Meanwhile the emerging world, which has acted as an engine of growth and optimism over the last few years, is now becoming a source of skepticism. Specifically, India and several South East Asian nations are suffering from set backs. This is due to the eventual plan for the United States Fed to roll back its tapering programs.
The U.S. quantitative easing policy injected liquidity into the market, creating cheap credit around the world. With that program now ending, borrowing costs will rise and the U.S. dollar will strengthen. This will have dramatic impacts on emerging markets that were relying on a cheap dollar and low borrowing costs.
The world’s second largest economy, China, is suffering from some setbacks of its own. During the 2008 fiscal crisis, the Chinese government encouraged local governments to borrow and invest in local projects. This created a culture of borrowing. With debt levels surging, many analysts are wondering if local governments can actually afford to make good on their debts.
Manufacturing growth has also weakened. However, local consumer spending and imports are rising, leaving investors confused on which way the economy will head.
Using Stock Market News As Part of Your Investing Strategy
As a savvy investor, understanding these competing trends could prove essential. Turbulent markets create opportunities for both profits and losses. This means that there are a lot of opportunities to generate profits, but the risks of suffering losses increases. In general, the higher the risks, the higher the potential for profits.
For example, the Dow Jones Industrial Average suffered its biggest drop since September this past Monday. If you had short sold a DJIA ETF or Index Fund, you could have generated a lot of profits. At the same time, with the DJIA having just suffered a large loss, there might now be an opportunity to pick up DJIA stocks on the cheap.
With so much volatility in the markets, investors should be cautious with their investments. A little bit of time and effort analyzing markets could go a long way in generating profits and guarding against losses. Key developments in the job markets in the United States and European Union, along with consumer demand across the world, will have huge impacts on the economy throughout 2014.
At the same time, these next few weeks may prove vital for setting the tone for the rest of the year. If major debt and budget issues in China, the United States, or the European Union continue to eat up headlines, the global economy might be in for a rough ride. On the other hand, if key challenges can be overcome, the world might be primed for a period of strong and stable economic growth.