Is The Worst Over For US Stocks?

While US stocks have been flying high for the most part over the past 6 years, the year 2015 has been rough of the market. However, what we've seen over the past couple of weeks leads many to believe that the worst is over. However, is the worst really over or are we just in the eye of the storm? Today, we'll talk about why US stocks have had a rough time throughout the year, why we started to see gains in the market again, whether or not we can expect the bullish activity in the market to continue and how binary options traders can take advantage of the trends.

What Caused US Stocks To Have Such A Rough Year?

It's important to remember that there are several factors that have a major effect on the US market. With that said, it's impossible to pinpoint all of the factors that played a role in the declines. However, there are a few major factors that are relatively easy to connect to the declines we've seen…

  • Federal Reserve – First and foremost, the Federal Reserve caused a bit of investor concern starting late last year when they announced their plans to increase their interest rate by the end of this year. A higher rate means that consumers are likely to spend more money on interest and will have less money for general spending, which in turn trickles down to less profits for corporations. While the Federal Reserve hasn't yet increased their rate this year, this is leading to quite a bit of resistance in US markets.

  • US Economy – For the most part, we've seen positive economic conditions in the United States for the past few years; lending a hand to the growth we've seen in the market. However, in the year 2015, economic growth in the US has been sluggish at best. With exports falling as a result of a strong dollar and US consumer spending growing at a snail's pace, economic conditions in the country just aren't looking good.

  • Global Economic Conditions – Finally, global economic conditions are a major cause for concern for investors as well. In fact, the massive declines we saw in major US indices started as the result of a Chinese market crash and questions about China's economy. However, China isn't the only economy causing concerns. Europe and more than 20 other economic regions are having a hard time. Because the US depends so heavily on exports, this is another major cause for concern.

Why Did The Market Start To Pick Back Up?

If you look at market performance over the past two weeks, it seems as though US markets are out of the water. Throughout the past two weeks, we've seen relatively bullish activity. Believe it or not, this activity was caused by poor economic conditions. Stay with me here… one of the biggest concerns for investors was the Federal Reserve rate hike. However, the Fed can't raise rates under poor economic conditions in the United States. Doing so could through the country into an economic recession. So, with poor economic conditions becoming worse, investors know that the Fed can't increase it's rate; and while poor economic conditions are negative, the fact that the Fed's rate is likely to stay low longer than expected overshadows the economic concerns. As a result, we've seen a rally in US markets.

How Long Is Bullish Activity Likely To Last?

In my opinion, the bullish trends we're seeing in the market aren't going to last as long as many would like to see. Ultimately, this strong activity is happening for all of the wrong reasons, pushing the US market back into the problems it was facing before the correction; mainly overvaluation. The reality is that under poor economic conditions in the United States and around the world, we can't expect to see great things out of the market for very long. What we're seeing is excessive risk taking based on a figurative matter known as interest rates. While this may last for a few months, interest rates will eventually have to go up. The higher the market goes between now and then, the harder the fall is going to be when interest rates do rise. Keep informed and check out the latest financial news.

How To React To The Trends

  • Short Term – For now, you'll want to ride the trends up. This means watching the Dow, NASDAQ and S&P 500 for call option opportunities.

  • Long Term – In the long run, keep a close eye on the news. When this ship starts to sink, it's going to sink fast; so you'll want to catch it in the beginning. As soon as the declines start again, start purchasing puts to ride the trends down to profits!

What Do You Think?

What do you think of US markets? Let us know in the comments below!

[Image Courtesy of The Silver Ink]