posted on May, 12 2006 @ 12:45 PM
What's happened to the markets? That's a simple question to answer. What's happened to the markets is that investor confidence has declined. In
essence, those people who invest in the stock markets are reacting to news and world events. Investor analysis of the world news and global economic
trends have led many to believe that the prospects -- at least in the short term -- are not good.
Many things affect investor confidence. Fuel prices and availability (long and short term), prospects of global trade interruption (due to possible
war, for example), trends in consumer demands and spending, inflation and other speculative aspects and trends are things that can influence the stock
Stock market gains and declines are often cyclical in nature. Even without world events as causal factors, stock markets regularly rise and fall as
investors participate in profit taking. That is, they sell their stocks to reap their profits in cash or to reinvest.
In my opinion, and it's only my opinion, the present drop in market prices is a reaction to current global events, namely the possibility of war with
Iran and the possible disruption in oil supplies. Additionally, the prospect of inflationary conditions developing in the very near future due to
looming increases in manufacturing costs -- resulting in higher consumer costs might have had some effect in the losses the market has experienced.
Increases in manufacturing costs are expected because, besides oil, the price of metal; steel, iron, copper, etc. are all on the increase.