The stock market is greatly influenced by the general economy and I have always stated that on this blog.
Following up on my last post about is this summer rally real?, we are now seeing that August hasn't been a good month for stocks. I am writing this on 8/20/2010 and as of mid morning the Dow Jones chart for August looks like this:
As you can see, August has seen the Dow go from a high of a little over 10,700 down to just under 10,200. That's around a drop of 5% and bad news is now starting to come out about the economy more regularly.
Just today there was this MSNBC article about more an increasing number of people are having to take hardship money out of their 401K's. That money comes with a 10% penalty and taxes have to be paid on it so anyone that does this REALLY needs the money and is desperate. This is a big indication of just how bad it is out there and how many people are in big trouble financially.
Also just yesterday, the market went down because of a bad jobs report. More jobs were lost in July then economists had predicted and companies look to be pulling back their hiring. I have talked about how I think we are in for bad times ahead as I think all the debt and foolish stimulus bill shenanigans are starting to catch up with us. I think the real unemployment numbers are MUCH HIGHER than the "official numbers" and I think things are going to get worse.
Now, the stock market CAN go up in troubled times but that is rare. The politicians can spin all day long about how things are about to get better or things are really not as bad as they seem but I don't believe them. I THINK THINGS ARE MUCH WORSE THAN THEY SEEM and we are going to be seeing that soon.
It the bad economy news stories continue to come out day after day and week after week, it is going to seriously stop average people from wanting to buy stocks. That will make the market go down and that is where I think it is headed. Reality sooner or later has to catch up with us and the stock market is going to act accordingly which means it is going to go down.
Let's hope I'm wrong but that is the way I see it.