Reversal

Two points.

That’s what wrestlers score when they get a reversal. And that’s what seems to have happened in the US stock market.

A month ago, higher energy prices had people worried that a dampened consumer would weigh on the housing market, which would lead to more foreclosures and additional banking writoffs, and maybe even more failures.

Now, lower energy prices have people expecting that a revived consumer will stabilize the housing market and lead to a financial recovery. That’s why financial and consumer stocks are leading this recovery.

Ironically, lower oil should lead to lower inflation, removing much of the need for the Fed to raise rates. And with many banks on the edge of capital needs, the Fed is likely to leave rates unchanged, at least for now. Financial companies need time to earn back many of their losses.

In wrestling, a reversal scores you points and puts you in control of the match. Let’s hope that the consumer remains on top, at least for this round.


Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-03T20:47:47+00:00 August 12th, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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