Consumer Confidence Falls, Home Sales Slump, Auguring Trouble for Holiday Shopping Season

With the holiday shopping season approaching, crumbling consumer confidence and slumping home sales, could prove to be a bad combination for retailers and the broader economy, according to BetOnMarkets.com’s Michael Wright. The worry is that the labor market may contract further and choke off the holiday spending that retailers are waiting for.

While the news may seem bleak, some traders were hoping that this turn of events would yet again force the FOMC to trim interest rates. While a lower interest rate would be a great bonus for consumers with debt, it can have negative effect on the American companies that have international
subsidiaries or imports from other countries.

A lower interest rate has a negative effect on the currency of that country, which means companies like Wal-Mart who import the majority of the items you find in the aisles from china, will incur much higher costs for those items, and will have to eventually increase prices. Higher charges at the local store will squeeze spending budgets even more, and that’s not taking into account the higher costs consumers now face at the petrol pump.

Another major issue a rate cut unleashes, on the already battered consumers, is inflation. In order to maintain inflation within the targeted band, the FOMC increases or decreases rates, as it sees fit. Over the last few meetings, the FOMC stated that the threat of creeping inflation was preventing them from making cuts. Obviously they decided that the risk of higher inflation was worth it last time. Will the FOMC take that risk again, well your guess is as good as mine.

While there remain a lot of questions to be answered about the current state of the markets, and potential market direction, the one area that is now becoming clearer is that we will possibly be experiencing an increase in volatility in the SP500.

This means that while the market direction won’t be known, any move will be overreacted. The main reason for this is that most traders have been very skittish and get out the moment more bad news hits the market.

For that reason, it would be in the best interest of the trader to use the ‘Up or Down’ option available at BetOnMarkets.com. With this option, a
trader will profit if either of the triggers, which he sets on either side of the market, gets hit.

A Trade on the SP500 with a 19 days term, and 50 points of the spot up, and 50 points down, will potentially return an ROI of 10%.

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