(Drivebycuriosity) - The recent stock market reminds me of goats - and sheep & cattle. They don´t think, they all follow the herd. If the alpha animal runs, the rest of the herd runs too, without asking. The same on the stock market. Yesterday the Fed hiked her interest rates again - as expected - and announced more hikes for next year - which also was expected. But shortly after this announcement stocks began to fall and kept sliding the rest of the trading day.
Yesterday nothing unexpected happened, nothing was new. The stock market just continued the nasty slide which started in October. Wall Street is driven by negative sentiment
again and herding behavior rules. Falling stock prices are creating fear and
are
inducing more people to sell. The crowd of fund managers and other so-called
professional is following blindly some skeptic bellwethers. Professional portfolio managers, including administrators of large
funds, usually act as a herd. When their bros are selling they are
selling too which amplifies the stock market movements. The recent slides animated many fund managers - and others - to take
profits,
apparently this encouraged short sellers to
amplify their bets against the stock market. So the slides accelerated,
causing more selling - a typical herd behavior. Falling stock prices
also triggered stop-loss-orders. Many professionals set these sell
orders to prevent further loses.
The negative stampede is unfounded. The herd ignores totally that the US economy is sound and is growing more than 2% annually, the unemployment rate
dropped to historical lows and company earnings are climbing more than 20%. We are far away from a recession as I have explained here (
driveby). And relatively cheap oil (gasoline prices are below last year`s level) are creating a new tailwind. I think this correction will soon be forgotten as the many corrections since spring 2009 and the bull market will continue.
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