Market Volatility Continues…What Next?

Here’s an interesting perspective from Bob Doll, the head of Blackrock. He always has keen insights. Here’s a link to his full commentary.

Here are the highlights on his comments about the recent market activity:

Why the decline? markets moved into near-panic mode in the face of the escalating sovereign credit crisis and a lack of clear response on the part of European policymakers.

Over the weekend, European governments and the European Central Bank (ECB) put forth a series of measures designed to safeguard European financial stability.

These actions improve the situation, by there are issues outstanding.

Euro has declined noticeably in value, causing the US dollar to regain some ground.

Lost in the shuffle of the debt crisis was a surprisingly strong jobs report in the United States, which revealed that 290,000 jobs were created in the month of April. (There were also noticeable upward revisions for the months of February & March).

The overall data was much better than most observers expected, and we believe the economic recovery that has now been in place for some time is finally translating into meaningful improvements in the employment picture, a trend we expect will persist for some time.

Given the sharpness of recent trading swings, we expect many investors will continue to approach the markets with caution.

We would point out that since the market bottomed in March of 2009, we have seen three (3) selloffs of a magnitude of 7-10%. The first occurred last summer, the second in mid-January to mid-February and the third over the past couple of weeks.

Such market action are “normal” in the midst of bull markets, and, at least in the first two cases, markets subsequently recovered on the back of improving fundamentals, attractive valuations and continued improvements in economic activity.

Markets remain under pressure as a result of the sovereign debt issues in Europe, policy tightening in China and elsewhere, and uncertainty surrounding pending regulations for the financial services sector. 

In our view, however, the positive forces of improving economic growth, an absence of inflation, low interest rates and stronger corporate earnings should continue to move markets higher.

We continue to evaluate the current situation. We’re only a phone call away if you’d like to discuss anything in more detail.