• 2 hours Mexico Kickstarts War On Junk Food
  • 10 hours How America Could Go Green Right Now
  • 1 day Russian Prestige And American Politics: The COVID Vaccine Race
  • 1 day Is The Silver Rally Over Or Just Getting Started?
  • 2 days Alibaba-Backed Tesla Competitor Set To IPO In The U.S.
  • 2 days Emerging Economies Could Get Left Behind In Race For COVID Vaccine
  • 3 days Dead Malls Could Be Amazon’s Next Target
  • 3 days Unpacking Biden's Energy Plan
  • 3 days Russia Aims To Become World's Top Gold Producer
  • 4 days Global Tech Stocks On Edge Over Trump TikTok Ban
  • 4 days Cobalt Squeeze Threatens The Electric Vehicle Boom
  • 5 days COVID Has Sparked A Surge In Cybercrime
  • 5 days Precious Metals Bulls Still Have Plenty Of Room To Run
  • 6 days The U.S. Has The Tech To Go Green, But Will It Use It?
  • 6 days Massive Losses Force Russian Commodities Giant To Slash Dividends
  • 7 days Markets Up On Stimulus Hope
  • 7 days UK To Invest In Europe's First Geothermal Lithium Recovery Plant
  • 8 days TikTok Takes Center Stage In US-China Tech War
  • 8 days Are Semiconductor Stocks Overvalued?
  • 9 days Jobs Report Doesn’t Say Much Amid COVID Uncertainty
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

The SP500 Index Could Bounce Short-Term

The standoff between Republicans and Democrats over "Obamacare" is currently unfolding. However, the real test will occur on October 17, when a decision on whether to raise the debt ceiling will need to be made. In the meantime, U.S. stocks are "oversold" at current levels and could rebound to 1700/1720 in the short term.


Head to head, once more

Pragmatism has not prevailed this time in Washington, D.C. and approximately 800,000 workers will be without a salary until a difficult compromise is reached on Capitol Hill. In the past 40 years, half of U.S. government shutdowns (around 17) have lasted less than three days. Even fewer of those were protracted for more than 20 days. The goal is to find a solution before October 17, when the federal government debt will reach its ceiling. Congress could, as an example, approve the spending bill for the period necessary to prevent additional problems in the near future and simultaneously increase the debt ceiling.


U.S. numbers are improving

In reality, the Federal deficit has fallen from approximately 10% of the Gross Domestic Product (GDP) in 2010 to almost 4% in 2013. The deficit is still $640 billion and needs further improvement; that is why a swift solution in D.C. is essential. As a result, 'prudence' is now the buzz word among investors. Stocks have contracted during the entire month of September, while the Treasury yields have again declined. These trends could be reversed in the short term as stocks are appearing oversold at current levels. A rebound of the S&P 500 index to 1700 - 1720 is possible, considering the favorable seasonal conditions for U.S. indexes during October. The U.S. dollar could also briefly rebound, but the trend for this year should stay on the downside. EUR/USD could hit 1.40 by December 2013.


Italy is still under the lens

Europe has avoided another major financial crisis. The Italian government, led by Mr. Letta, was able to confirm its mandate after winning a vote of no confidence last week. Stability will be necessary to continue with the economic reforms initiated by President Monti. Italy wants to keep its deficit below/near 3.0% this year and then gradually improve it after 2014. Considering its huge debt, interest rates must remain low because interest rates payments are around 5% of the GDP. It is a challenging, but not impossible, task and the decisive battle will take place in Roma's parliament. Unstable governments will not help the economy and rating agencies are watching the Italian political process very closely.

 

Back to homepage

Leave a comment

Leave a comment