Why has the Stock Market been loosing ground?

Answer 1

The stock market is a parking place for money that is valued based upon estimations of future earnings and growth and Investors confidence in such.

Thus, if you have a choice to park money in stocks expected to yield 10%, with some serious risk of loss or to park your money in governement bonds guaranteed to yield 5%, you might choose bonds instead of stocks. If yields go up they will be more appealing to investors (at least some) than stocks.

This year, going into the market top, government bond yields have risen (see chart link below). Some time in May it was apparently enough to get folks to start shifting money from stocks into bonds (note how yields fell as bonds rose since mid-may).

To make matters worse, the Federal Reserve has been (overly, imo) concerned abut inflation and has been raising short-term interest rates (17 times) in order to slow demand for commodities. Because our economy is rather sensitive to interest rates (because so many folks carry variable rate debt), investors are worried that the Federal Reserve has gone too far and has placed the economy at risk of recession. In a recession, stock earnings suffer and investors become more interested in guaranteed investments and less interested in stocks who's earnings are more questionable.

So, stocks have fallen because bonds are relatively more attractive and there is some doubt about the future of the economy and earnings.

If the Federal Reserve stops raising rates (or hints that they will) and earnings continue to look good, the market will likely reverse and move higher.

Mark S. Young

Answer 2

Honestly, there is no reason why… if you look at all the economic news about the US, we should be doing great because we are…inflation is a huge concern, and today, good news came out about inflation, and the market was down 90 pts... for some reason people just keep selling, driving down the market. the selling could be because people want to take advantage of their gains over the last year… other than that, no reason what so ever!

Answer 3

Do you mean why is it losing ground?

Let's see -- inflation is a concern, the Republican president has spent the surplus that he inherited and has run up the worst deficit in history, we are involved in wars in Iraq and Afghanistan with no exit strategy, interest rates are rising -- which makes the cost of funding corporate projects higher, and energy costs have gone through the roof.

Have I missed anything?

Answer 4

Recession

Answer 5

from what i saw on aussie tv this morn it is due to inflation in usa