Whats up with the stock market? After an exciting few months we have had a very negative week.
One of the key factors is the US Govt easing back on its stimulus. Buying back its own bonds and keeping interest rates amazingly low puts cash in the system to stimulate the economy.
The reassuring news when they talk about easing this back is that it is working! US house prices are going up again.
So if that is good news why has the US (and of course OZ) market fallen?
Well shares can go up either because we are prepared to take more risk and pay higher prices OR because company profits have gone up making shares fundamentally worth more.
“risk on” is the theme we saw this year, the stimulus cash finding its way to the stock market. If that dries up we see the market pull back while we wait for profits to rise.
I feel much more optimistic for the long term when I hear about signs of real economic recovery in the world’s biggest economy but we may be watching this “risk on” and “risk off” roller coaster for a while until it really kicks in.

By Trevor Thompson. 
CFP DipFP
SENIOR PARTNER