2010 will be one for the record books. A huge bull move pushed the Dow Jones Industrial average above its September 12th, 2008 high prior to the Lehman Brothers meltdown. Huge amounts of Federal aid washed into the market to bailout failing financial and other institutions. This influx of capital combined with surprisingly solid corporate earnings, propelled the bull market of 2010. Weak employment numbers have not appeared to have affected retail sales with strong black Friday performance lifting retail shares.
However, the spectrum of international debt contagion has held a heavy hand over the surging up move. Starting in Greece and moving to Ireland, the second tier European economies debt woes have shaken the worldwide financial system to its core. Unfortunately, the US is not immune to the fates of the European nations. The present chaos in Ireland has resulted in the US stock market being knocked off its highs in the month of November. The final month of the year will be entered on a negative note despite the massive influx of Federal aid, sold earnings, and strong retail sales. We cannot escape the present interconnectivity of the world’s economies.
The stock market outlook for 2011 promises to be very interesting. Additional regulations and changes in the low latency algorithmic trading game are more than likely to change than compared to previous years. Flexible traders will continue to be successful regardless of what the regulators toss our way. On the macro front, we can expect more negative situations among the nations of the European Union. These may continue to weigh on the US stock market unless an overall solution is devised. It appears that the continued positive effects of the Federal aid packages and solid corporate earnings reports will continue to counteract the negative for at least the first half of 2011.
It’s very possible that the US economy will catch enough traction in early 2011 to counteract the bearish effects of the European situation. I am expecting a bullish tone despite increased volatility in 2011. It should be a very interesting year for traders!
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