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Is The Stock Market Strong?

Whenever the stock market starts looking robust, some issues arise which serve to bring it down again. These issues could be political, economical, natural calamities or any other. Examples of the same in the past were Japan's natural disasters like the earthquake and the tsunami, the Euro crisis; particularly the problems affecting Greece, political instability in Washington, etc.

After the year 1997, the stock market has been looking good so far in 2013. But still, the concerns plaguing Europe and Washington do persist. Many past years have proved that the stock market is indeed very unpredictable. The year 2011 began with the broad market index looking very strong indeed, but after the month of May, when it gained 9%, it started dropping and was at its low in August. This trend was a repeat performance of the previous two years.

On the other hand, if we consider the year 2012, it was February that saw a high jump by 8% by the S&P 500 but within three months, it dropped back to its previous level, following speculations that Greece would forego the euro and also there were weak employment reports.

Coming back to the present, the problems assailing the European countries never seem to cease. The Spain's Prime Minister Mariano Rajoy has had to resign following bribery charges, while Italy goes to the polls in the latter part of this month with an armful of issues like those of its former prime minister Silvio Berlusconi, who, in addition to having been involved in a scandal, has been accused of trying to buy votes with unfeasible promises. In the midst of all these controversies, the banks of these nations and their debts will probably suffer.
Consequently, it has driven the interest rates for the two governments higher over the past weeks. There is also the possibility that Germany could fall into recession along with its neighbors and if that happens, these nations constituting the second largest economy of the world will be affected deeply and this will distress other countries, especially China, as Europe is a leading customer of China as far as exports are concerned.

The budget problems in Washington persist and it looks like steep spending cuts will take effect from March if the problem is not solved. It cannot be forgotten that the country had had to bear its top credit ranking loss in August 2011 and that investors had started shying away from the stock market field. On the currency front, Japan has been striving hard to weaken its currency and the U.S. dollar has risen in value against the yen.

Presently the stock market news is that most companies in the S&P index that reported results through last week have beat the earnings estimates.

In 2013, the S&P 500 has seen some of its best ever figures; having soared by 6%, but historically, it needs to be maintained. With reports of slow earnings by companies; if there is no solution reached to avoid the budget cuts, then the stock market will naturally react and slow down.