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Don't Try to Guess Market Reaction to Goldman Saga

By Sean Hyman   |   Monday, 19 Apr 2010 12:11 PM

Wow, the SEC really shook up all of the financial markets on Friday.

The SEC began a probe into Goldman Sachs as the SEC accused them of fraud.

Then, on Sunday night, we found out that the United Kingdom and Germany may also look into Goldman Sachs as well.

So now, everyone’s joining the party, it seems.

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So that shook up the markets and caused the markets to dip fairly hard against their trends.

Financial markets don’t like uncertainty. When a shocker comes out like this, investors will run for cover and act very defensively.

Well, in the currency market, that means that the money runs to the defensive players: the dollar and yen.

So where does it all go from here?

Here’s how this typically plays out. The news shakes up the market for a few days to a week or so, but the market usually doesn’t reverse trends on things like this, most of the time.

There are many news announcements throughout the year and many “political surprises” as well. Most of them “rattle the market” for a period of time but rarely make things change course.

Now, there is one caveat to all of this. This latest SEC probe really helps to lay the groundwork for President Barack Obama’s bank-reform bill. If that bill passes, it could shake things up further as the markets have to recalibrate for a bit and adjust to the new way of doing things (which would be a bad way, in my opinion, but nonetheless, a “change” that would be coming to America).

So watch to see how blown out of proportion all of this gets.

The Obama administration has been very aggressive in “bringing change to America.”

I don’t think it’s the type of change that is good for the economy in the long term or the financial markets in the long term.

If these probes get deeper, with more countries piling in and it gets drawn out, it ends up being a catalyst for a “change” in the markets.

The key is to not try to guess what will happen.

Allow the markets to point the way and tell you what they're going to do as a result.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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Wow, the SEC really shook up all of the financial markets on Friday. The SEC began a probe into Goldman Sachs as the SEC accused them of fraud. Then, on Sunday night, we found out that the United Kingdom and Germany may also look into Goldman Sachs as well. So now,...
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2010-11-19
 

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