As of early this year the markets have been struggling with volatility and underperforming sectors. The reason that was given earlier this morning on Bloomberg television was because the interest rates, as dictated by the U.S. government, have been rising. I agree that stocks have been struggling but I cite an uncertain environment, coupled with volatility caused by a large tranche of investor movement.
The reasons for volatility, which caused an uncertain environment for employers earlier in the year, is the lack of higher interest rates. The low interest rates are artificially inflating the markets here in the U.S. while markets grow overseas due to the decrease in debt for the U.S. This means that as the markets in the U.S. correct this creates a chain reaction throughout the world which causes the overseas markets to feel the pain of relatively high unemployment and government intervention in (namely) corporate compensation. This has given rise to volatility in the markets that is affecting consumers who have been forced to rely on stocks due to the low interest rate environment.
So then the U.S. markets find themselves in the unenviable position of needing low interest rates to propel growth for the overall economy, but wanting to temper that growth, and increase the growth of the average consumer’s disposable income by increasing interest rates. Luckily for the U.S. economy when interest rates do eventually go up there will be some pain for the overall markets in the short-term as the markets correct to the new reality. But as consumer spending increases this will translate into a net positive by the end of the year.
Look for the U.S. economy to grow by 3.19% YTD (Jan. 14′) by the end of the year to total cumulatively 18,401.82 in the Dow Jones Industrial Average.