Better Expectations Drive the Stock Market

A sluggish economical recovery, weak job market, financial crisis in Europe, and the fear of global recession kept the major stock market indexes in a choppy pattern during 3^rd quarter. However, October started with some good news and better-than-expected statistics. These were able to lift S&P-500 from 1075 to 1225 (almost 14%) for two weeks. Among good economic news: September was one of the best months of the year for the US automobile industry and retails. Also according to the latest GDP forecasts, the 3^rd quarter can be the best quarter in a year.

The slow economy, high unemployment, Euro-zone crisis, and the threat of global recession might not find a quick solution but as old news all these have been priced already in a market equilibrium. The question is what will be the next. As a rule, the future expectation is the thing that drives the stock market, not the past performance. Statistically, November and December are bullish months of a year. In addition, this time the annual cycle may be propelled by positive economic projections. Therefore, if no more bad news wakes up the pessimism again, 2011 has a chance to end on a positive note.

October: Is It Time for Bull?

Lately, the economists re-evaluated their previous estimates and significantly lowered the predictions for the US economic growth this year and in 2012. This fundamental equilibrium reset, as one-time event, coincidentally has combined with a cyclical September-October low market season. A high volatility, remaining macroeconomic risks, and crowd fears persist. A lot of confusions still dominate the stock market. What is next to expect?

Europe troubles might continue to affect the global markets. The unemployment rate and housing market might not improve quickly. However, the US corporate reported earnings continue to exceed the profitability estimates in most cases. A lot of stocks are now cheaper than during the 2008-2009 market calamity. The future expectation is the thing that drives the market, not the past performance. That is why many investors and traders hope for rallies.