WEDNESDAY JUNE 23, 2010

One Confused Market

Boy, is this market confused?

Last month, the global markets were all worried that the debt crisis in Europe was going to be a contagion and were demanding austerity actions from governments everywhere.  This week, after a series of disappointing housing data in the U.S, the markets are now worried about a "double dip" recession and are calling for more stimulus and suggesting the Federal Reserve actually cut interest rates!  Wow, what a swing in sentiment!

The market's forecast for inflation is equally confused.  Yesterday, the U.S. Treasury issued 2 year Treasury notes at .71%, a recored low yield for a 2 year auction!  Yet, the price of gold is perched near a record high price of $1,228 an ounce.  How can this be?  The Treasury market is suggesting that inflation is not going to be an issue anytime soon while gold is flashing signs of imminent danger.

Both of these anecdotes suggest there is a great deal of uncertainty in the market.  What is amazing is the wide range of forecasts, from a strong U.S. economic recovery to a double dip recession brought on by another collapse in housing and prolonged unemployment.  For investors, it means the recent volatility experienced since April will likely stick around through the end of summer.  Expect volatility.  If we don't get it, happy day! 

POSTED AT 1899-12-30 10:40:00.0

KEN ENTENMANN, CFA
SENIOR VICE PRESIDENT AND
THE DIRECTOR OF INVESTMENT MANAGEMENT SERVICES

Ken is a Senior Vice President and the Director of the Trust and Investment Services at Alliance Bank, N.A. He has 23 years of investment experience and oversees the management of assets totaling $1 billion. He holds a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from the William E. Simon Graduate School of Business Administration at the University of Rochester. He has also earned his Chartered Financial Analyst designation. He is a member of the Executive Committee of the Trust Division of the New York Banker's Association. He is also a director of the Central New York Community Foundation.

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