THE historic swings in the US stock market over the past two weeks have investors struggling to figure out where equities may be headed next. Only one thing seems clear: The volatility is far from over.
A lack of progress on some of the economy’s biggest issues -- from Europe’s sovereign debt to increasing signs the U.S. economy is in danger of slipping back into recession -- will drive more uncertainty and moves from one extreme to another.
However, with the S&P 500 down 17.6 per cent from its 2011 high, many investors say a bottom could be near, and bargain hunters could trigger at least a momentary bout of buying.
“We’re not even close to the end of volatility, but given a decline of almost 17 per cent in 13 days, we could see a rise from these levels,” said Mike Gibbs, chief market strategist at Morgan Keegan in Memphis, Tennessee.
“If there’s something major with the European situation, that could be a catalyst for value investors to come back in.”
The situation in Europe has been dictating much of the market's recent movement. Last week, shares fell on Tuesday after a meeting between the heads of France and Germany failed to squelch fears about eurozone leaders’ ability to contain the region’s debt issues, which could impact global growth and the profit outlooks of US banks.