The global financial markets are an extremely fluid entity, and remain vulnerable to significant and rapid change. It is the ability of financial traders and investors to react to this that ultimately determines their long term success or failure, and the recent global economic climate has provided the ultimate test of an individual’s mettle and mental fortitude.
During the formative part of 2013, the market suffered a considerable decline as investors sought flight and looked to protect themselves against ongoing economic issues in Europe and the U.S. The widely discussed fiscal cliff was causing considerably concern among traders in the final financial quarter, despite originally being dismissed by Wall Street insiders and experienced investment brokers.
Evaluating Market Sentiment- Why now could be an Ideal Time to Profit in the Market
With the fiscal cliff and the temporary government shut-down now having passed into the annals of history, however, the prevailing market sentiment suggests that any initial concern was significantly overplayed by the media. That said, every new data release seems to trigger waves on uncertainty in the financial markets, before investors display their resolve and adopt a robust approach to trading. Most recently, for example, U.S. stocks fluctuated significantly as the $25 billion deal to acquire Forest Laboratories Inc. offset slower-than-forecast growth in New York-area manufacturing.
More specifically, Forest Laboratories surged by 30% after Actavis PLC consented to purchase the maker of the Alzheimer’s drug Namenda, which in turn pushed the Standard and Poor’s 500 Index close to a record. This came investors initially reacted negatively to poor manufacturing data-sets in the New York region, and completed a period of significant price movements and volatile activity. The bottom line appears to be that everyone from currency traders to equity investors are becoming immune to these sudden shifts, as their optimism and sense of sentiment remains relatively unaltered.
Reasons to be Cautious – Why Optimism is not Always a Prelude to Profit
The volatility of the financial market place remains a considerable cause for concern in the current economic climate, however, as the shift in sentiment and trading volumes during 2013 served to emphasize. With this in mind, it is worth remembering that optimism is not always a prelude to either long or short term profitability, especially if traders execute their orders without a tangible sense of market direction. The last six months have seen the release of wildly conflicting economic data, for example, which has created a fiscal market that is driven largely by underlying and generic factors.
Another reason for investors to retain a semblance of caution is the ongoing eurozone crisis, which is having a far more tangible impact on the global market place. Although Euro Area Finance Ministers are almost certain that the region will sustain its most recent growth during the next six months, there is a growing sense of impatience among European nations with regards to the sheer extent of the Mediterranean islands significant debt levels. Until this is fully resolved, the prevailing sense of optimism will be continually challenged.
Despite lingering concerns and trepidation about the seemingly endless eurozone crisis, it is fair to say that market sentiment remains positive among financial traders. While the need for caution remains more prominent than in a thriving global economy, traders with a positive philosophy and suitable range of exit strategies are well placed to consolidate their positions in the current climate. Some may even be able to profit as trading volume and currency values fall, so long as they are quick to act and time their transactions effectively. The results of new data and economic developments will always be influential in dictating the long term direction of the market, however, so investors must factor ongoing uncertainty into their longer term plans.