Wednesday, January 9, 2013

Markets may remain volatile in the near term

Market volatility is expected to rise in the near future as analysts expect some kind of a rough ride after a historic decline last year and a rally this year so far.

"We're likely to come into a period of volatility that would be parallel to the volatility we saw when all of a sudden it was realized we weren't going to get a deal on the 'fiscal cliff,'" John Stoltzfus, chief market strategist at Oppenheimer said on CNBC.

"Overall the market is poised this year to continue the process that we saw last year."

This could spell bad news for investors who may have been hoping for gains this year after a number of much-fancied stocks failed to live up to expectations. But the uncertainty in Washington is likely to translate into turmoil in the markets this year.

The compromise deal over the so-called fiscal cliff resulted in a 39 percent drop in the CBOE Volatility Index. Volatility rose late in the year when Washington technically missed the Dec. 31 deadline to get a deal done. The index has been moving higher so far this week, CNBC said.

The cliff entailed a series of severe tax increases and spending cuts that were averted in a last-minute deal which halted immediate panic but left a string of nagging concerns that will be addressed over the next two months.

Higher levels of volatility make it difficult for investors to gauge and predict stock movements and arrive at investment decisions.

The nation still has to do something about the $16.4 trillion debt ceiling which may be likely breached in another month or so. 

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