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Top 10 Reasons Stock Market Will Fall In 2011

By Bruno

The following are the Top 10 reasons the stock market will fall to realistic levels by the end of 2011.

1. Unemployment

The unemployment number has fluctuated between 9.5% and 10% for two years. When President Obama came into office, he promised to create jobs and get the unemployment rate down to 8%. Put simply, he has failed.

2. Real Estate

Many economists feel that real estate is the key to the economy. This might be true, but other powers at work are attempting to make the stock market the key to the economy. As long as the stock market can be artificially inflated, the optimism of the public can be maintained. For those who are realists, it would be important to look at real estate performance, which has been poor. Real estate prices have decreased 8% year over year (2009-2010). Signs point to continued weak performance. Real estate is now officially in deflation mode.

3. QE2

Do you remember when Federal Reserve Chairman Ben Bernake said that we are facing ‘unusual uncertainty?’ This was in the middle of 2010. Did everything get better that fast? Obviously not. If that were the case, what would have been the point of QE2? Bernake has even brought up QE3, which would only increase our debt to even more unfathomable levels.


4. Deleveraging

Since the public is fed up with reckless spending, it’s not likely that a QE3 will take place. Those in the reckless crowd will not be happy about this, but those who are prudent and wise will agree that deleveraging is the right course of action. Paying down our debt – not adding to it – is the only long-term solution to solving our current economic woes. When money is going toward the repayment of debt, it means less money is being spent. This will lead to a deflationary scenario throughout the broader economy, which will in turn hurt the stock market. Deleveraging is painful in the short-term, but it gets to the root of the problem.

5. Unemployment Benefits

At the end of 2010, more than 2 million people will lose their unemployment benefits. This is almost 1% of the population, which might not sound like much, but it will have a tremendous affect on spending. When the public doesn’t spend, prices decrease, which is yet another example of deflation.

6. Baby Boomers

Baby boomers are the biggest spenders in history. They are now retiring in record numbers. Since they will have to live off retirement money and decreased incomes, they will not be spending nearly as much money as they had in the past. This will have a massive affect on spending.

7. Fed Out of Ammo

Ben Bernake once stated that he would drop money out of a helicopter if necessary. He has certainly started the engine. However, if the stock market faces some turbulence in the near future, he doesn’t have nearly as much ammo as he did in the past to combat falling prices.

8. Banks Hiding Debt

This is not necessarily a fact, but many people close to those who work in the nation’s biggest banks claim that trillions of dollars of debt are being hidden. Yes, that is ‘trillions’ with a ‘t.’ This is also likely to be the subject of a WikiLeaks document that is supposed to be released at some point in January 2011. If this document is released, the financial sector of the stock market could face turmoil that rivals the summer of 2008.

9. Outflow

The stock market has seen a record amount of outflow in 2010. The reason the market has still managed to perform well is because heavy-volume traders have been playing the uptrend. However, when the trend changes, support will be absent.

10. Geopolitical Issues.

With rising tensions between North Korea and South Korea, uranium enrichment in Iran, instability in Pakistan, and continued efforts to destroy our infrastructure by Al-Qaeda and other terrorist networks, the stock market will have a lot on its mind.

Conclusion: Going into 2011 in bull mode might prove disastrous. Even if the stock market maintains its ground, the downside potential is much greater than the upside. Invest wisely.

About the Author: Bruno is a Internet marketing consultant and author. His job is to make money online by learning other marketers how to make money online with SEO, social media marketing and how to make money blogging.


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