Markets Nervous after Downgrade

Emotions, indecision and distrust of the political establishment in Europe and the United States will ensure the continuation of the market roller coaster.

If one likes adrenaline-packed theme park rides, then the New York stock exchange provided all the thrills one could take over the past two days. After record drops of all of the most important indexes on Monday, the next day brought about equally impressive gains. Nasdaq jumped by 5.3% and the S&P rose by 4.75%. This rise, however, is not a sign of good things to come and the market will regain its pessimistic outlook soon. At the moment, there is too much mistrust between the markets and the political establishment. For the savvy market players, this turbulence is a dream scenario, where quick money can be made. For the average citizen in Chicago, London or Warsaw, the current economy has brought nothing positive.

Last week, after the markets closed, the financial world was rocked by the news of the S&P downgrading the American credit rating. The change of rating shook the confidence of investors. If the country printing the most important reserve currency in the world is in trouble, then everyone is at risk.

After trade resumed, the global indexes fluctuated, but the next day, investors seemed to come to their senses. After all, the downgrade was in the works for months, and the market was doing badly before anyway. News of the American central bank’s successful sale of trillions of dollars worth of obligations, despite the downgrade, improved attitudes a bit. We will see in a couple of days if the wave of enthusiasm can continue.

It is possible, however, that the United States can’t craft a deal to get their debt under control. Everything depends on the Americans, and it is their actions that determine how the market will act.