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US Stocks' Wall of Worry: Market Confused Ahead of Taper Decision

By

Investors are wondering when the first taper will start, and whose initials will be on it.

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Well, so much for straight up. The Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), Nasdaq (INDEXNASDAQ:.IXIC), and virtually every other stock market index in the world has more or less leveled out for the moment. The moment being that wonderfully confusing time pre-potential-tapering of asset purchasing by the Fed. "These episodes I won't miss once the taping begins," says Captain Obvious.

The big news of the week, and one seemingly already priced in by the market, was the agreement on a budget deal, albeit a wee little one. Congress still has to vote on this legislation, but it looks like a done deal (read: members of Congress want to go home early for Christmas). Of course, they didn't quite dot all the i's or cross all the t's, as the looming debt ceiling situation still hangs in the balance. It will get done, but not before some attention-getting posturing and grandstanding by the photogenic folks in D.C.

For now, the only other major market-mover looks to be the estimates for economic growth that will be coming out of China in the next couple of weeks. They're not likely to rock the global boat in the near term. As for the longer term, keeping a life jacket at your side is something to consider.

Here's a quick look at the worries facing stock market investors. Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version and an explanation of how the Wall works.



QE: Now the only questions left are when the first taper will start, and if it will be initialed "BB" or "JY."

UNEMPLOYMENT: The headline in the US says 7.0%, but look below the line and it sure doesn't feel that way.

INVESTOR SENTIMENT: "Feeling stronger every day..." as this worry is on its last legs, unless something Grinch-like comes along.

EUROPEAN ECONOMY: Estimates out there for eurozone growth of -- get your microscope out -- +0.2% in 2014. Nano-growth is better than no growth, I guess.

HIGH-FREQUENCY TRADING:
Lloyd: Anything about high-frequency trading in the Volcker Rule?
HAL: Nope.
Lloyd: You pleased?
HAL: We all benefit when the financial markets are stable and rational and-
Lloyd: Don't even start with that.

CHINA: Wage inflation is making it a little less competitive and it's a little more likely that this export-driven economy will slow down.

GLOBAL ECONOMY: PMI readings far and wide looking better and better..."Could this be the magic at last...?"

BONDS: Like when your non-English-speaking cousins come to visit for a week and you don't know what to do with them, the financial world is not quite sure what to do with bonds...except hope they leave early and quietly.

CONSUMER CONFIDENCE: "Back in the high life again," but will it last longer than the four minutes and 22 seconds of run time of the eponymous song?

RETAIL SPENDING: Retailer news blackout about to begin, thereby adding mystery to confusion about Christmas sales.

CONGRESS: On the brink of passing budget legislation. Hey, I think I saw a pig fly by my head!

SEQUESTER II: On its way to the Congressional dentist to lose some of its teeth.

EMERGING MARKETS: That US-Iran deal may get sanctioned to death by Congress and the momentary calm that came with it.

ECB: The currency markets are pushing up the euro again. Thoughts about that action, Mr. Draghi?

DEBT CEILING: The miraculous nano-deal on the budget serves as a gentle reminder that Congress has still done nothing about this potential country credit-rating crusher.


What Is Lloyd's Wall of Worry?

by Lloyd Khaner

Welcome to my at-a-glance guide to the issues facing investors this week -- a unique tool for traders and money
managers.

Typically the term "wall of worry" refers to the entire body of concerns influencing stock market action. When the wall is high, meaning the market is nervous, stocks tend to get cheaper.

This wall of worry is even more specific. Every week I list the exact concerns in the marketplace and use the list to help me make buying and selling decisions. As I like to say, "Buy fear, sell cheer."

In other words, once the the wall rises above 15 blocks, start looking for deals. If the worry count sinks below 10, consider selling; prices have likely peaked.


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No positions in stocks mentioned.
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