NEW YORK (Reuters) - Elections in Greece and France over the weekend have ushered in a new period of uncertainty for financial markets that could stand in the way of the easy-money rally that boosted stocks at the start of the year.
We’ve long maintained that Japan is ground zero for the “QE works vs QE doesn’t work” debate. The Fed’s economic models, and 99% of the economic models employed by Central Banks in general, believe that monetary easing can bring about an economic recovery. The primary argument for this crowd if QE has thus far failed to produce a recovery is that the QE efforts have not been big enough.
The soap opera in Greece continues with Germany and France tugging on opposite sides of the rope, and support for Golden Dawn, an alleged neo-Nazi party rising in the wake.
French president François Hollande is on the sidelines, not wanting another battle with German chancellor Angela Merkel who has her own set of problems.
Battles in Washington over raising the debt ceiling and how to continue funding the U.S. government may be starting to weigh on the stock market. "We continue to prefer the stalemate of debt and budget talks in Congress as the primary driver of nearby price action," says Andrew Wilkinson, chief economic strategist at Miller Tabak.
Experts are split on what's behind this huge 4-year long bull market. Some believe it has been driven by improving fundamentals. Others believe it has been driven by the Federal Reserve's easy monetary policy.
By Marc Chandler:A fragile calm hangs over the foreign exchange market. as the month winds down. There have been some sizable moves in the underlying asset markets, month-end portfolio and hedge adjustments seem modest. Over the course of the month, global equities have rallied. Of note, among the majors the weakness of the Swiss franc (vs. euro) and the Japanese yen looks to have given their equity markets a boost, with the Swiss Market Index up 8.1% and the Nikkei up 7.1%.
By Bret Jensen:A lot has been written about the elections in Greece and France over the weekend and their impact on European policies, austerity and the continent's overall direction. While important, investor's focus should squarely be on Spain. The country is rapidly deteriorating and is fast moving to a bailout situation that looks to be coming to a head by the summer. This will have obvious ramifications to the worldwide economy and should cause a huge spike in volatility in our markets.