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Presented by Gareth Soloway March 18, 2013 10:48AM
The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is trading at $155.46, -0.42 (-0.27%). The low of the day was $154.20 as the markets have bounced well off their lows. So why did the markets fall today? Additionally, why have they recovered so nicely?
The Trigger: News
As part of a bailout deal reached with the EU, Cyprus committed to taxing deposits in its banks up to 9.9% for accounts over 100,000 and 6% for all accounts under. This means, all those savers who stashed cash (rich or poor) and were not wild spenders will pay dearly.
Why It Is A Big Deal?
Bank Runs: If you knew your money in the bank was going to be taxed at 10%, wouldn't you go remove it immediately and store it under your mattress? I would and so might many in European countries like Cyprus, Greece, Italy, Spain. This is the fear. If Cyprus is setting a precedence, bank runs could begin. Many in Cyrus have already gone to the ATM's and withdrawn as much as they can. Mass bank runs would send Europe into a catastrophic collapse.
Why The U.S. Markets Are Recovering?
Poor banking conditions in Europe and fear of a tax on deposits will only encourage money to be transferred into the United States banking system. More money into the U.S. is not a short term negative, but a positive. Some of this money flow will even find its way into the Dow Jones Industrial Average, S&P 500 and NASDAQ. In addition, any short term hurt to the global outlook is another reason the Federal Reserve will stick around longer, printing money.
Take the seven day free trial to the Research Center. Join the elite pros as the give you swing trade alerts, daily market analysis videos, reports and live broadcasts. Become part of the elite and profit for life. Join today.
Related: SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) and PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ).
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
The Trigger: News
As part of a bailout deal reached with the EU, Cyprus committed to taxing deposits in its banks up to 9.9% for accounts over 100,000 and 6% for all accounts under. This means, all those savers who stashed cash (rich or poor) and were not wild spenders will pay dearly.
Why It Is A Big Deal?
Bank Runs: If you knew your money in the bank was going to be taxed at 10%, wouldn't you go remove it immediately and store it under your mattress? I would and so might many in European countries like Cyprus, Greece, Italy, Spain. This is the fear. If Cyprus is setting a precedence, bank runs could begin. Many in Cyrus have already gone to the ATM's and withdrawn as much as they can. Mass bank runs would send Europe into a catastrophic collapse.
Why The U.S. Markets Are Recovering?
Poor banking conditions in Europe and fear of a tax on deposits will only encourage money to be transferred into the United States banking system. More money into the U.S. is not a short term negative, but a positive. Some of this money flow will even find its way into the Dow Jones Industrial Average, S&P 500 and NASDAQ. In addition, any short term hurt to the global outlook is another reason the Federal Reserve will stick around longer, printing money.
Take the seven day free trial to the Research Center. Join the elite pros as the give you swing trade alerts, daily market analysis videos, reports and live broadcasts. Become part of the elite and profit for life. Join today.
Related: SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) and PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ).
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
