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Thursday, February 4, 2010

Today's Market Decline and Further Expectations

For the most part, the markets tumbled to a low range today. The Dow dropped below the 10,000 level, which was deemed to be an important benchmark on Wall Street. This level maintained confidence in a healthy market, but the slide into low territory spurred further worries about the global economy.
First, the increase in jobless claims created a negative outlook for US investors. It seems that jobless numbers are continuing a downward pattern --continuous bad results are causing investors to think twice about this so called recovery. Second, fiscal troubles in Euro zone caused worries about the global economic condition. Greece's soaring deficit, and now worries about Spain and Portugal's economy sent the European markets on a whirlwind into negative territory. Thus, as expected the US markets opened later and continued this downward global trend.
So, my message to investors is to keep a good eye on the market's opinion and global economic conditions. Thinking like a Central Bank will keep you afloat during turbulent times. Currently, the Fed bank is closely following news from Greece, and so should we. Aside from all of the negative results from stocks, the US Dollar actually experienced gains today. It's important to understand that when one market experiences a down day, another market will thrive. There is an inverse relationship between markets. In this case, the US Dollar and equities. Investors are most likely to move towards a safe haven to hedge themselves from equities. The bond market is always considered to be safe. Thus, investors escaped the volatile storm to the more sheltering treasury market. And the US Dollar advanced because of this.
This is a tricky situation, because when markets decline most people believe that this will negatively affect the dollar, and commodities will rise. This theory is evidently wrong. Crude Oil fell 5% and Gold fell 4.4% today because of Europe's fiscal mess. When there's a global problem, commodities are usually impacted negatively. However, a US domestic problem will cause the dollar to decline, and commodities prices will increase.
With that said, what do we do now? The Dantes Outlook portfolio was hit today, but we still maintained positive territory. We are strictly in equities for the moment (CIMG), and a full summary will be posted when a sale is made and profits/losses are collected. Investors should expect a flat market tomorrow as Wall Street decides what to do. I don't think the dollar will be impacted as much; although, jobless claims may impact the growth that we've experience.
Still, investors should be cautious during the start of this year. The markets are also correcting themselves after the end of 2009 rally. We must remember that the global economy is still in shambles, and this is a tricky time for investors. There is always money to be made, but you have to think logically about your decisions.

**chart provided by Google Finance. Go to http://bit.ly/aECd5y for an up to date look at US Treasury Yields.**

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