U.S. stocks made modest gains in the third quarter- largely detached from the rest of the world. But as the next quarter begins, global ties could become more important. Bobbi Rebell reports.
U.S. markets may not be able to continue their solo act much longer. Markets made only modest gains in the third quarter, and as the 4th quarter begins, look for more ties, and reactions, to what's going on outside the country. Wayne Kaufman, Chief Market Analyst, Pheonix Financial Services: SOUNDBITE: WAYNE KAUFMAN, CHIEF MARKET ANALYST, PHEONIX FINANCIAL SERVICES (ENGLISH) SAYING: "The weakness in China is a big, big issue. Weakness in Europe, now weakness in Japan, so basically global economic weakness. And what I've been seeing is that the central banks around the world are going to do everything they possibly can to prevent the world sliding into a recession, and that is going to be supportive for markets." Keep an eye on Europe, and its central bank, says Charles Schwab Chief Global Investment Strategist Jeff Kleintop: SOUNDBITE: JEFF KLEINTOP, CHIEF GLOBAL INVESTMENT STRATEGIST, CHARLES SCHWAB (ENGLISH) SAYING: "One of the biggest risks is the pace of growth in Europe. If you look at how fast that economy has been deteriorating the risk of deflation and so far the lackluster efforts by the European Central Bank. If that is not successful, you can expect to see further weakness spill over here to the U.S. Already those low yields in Europe are keeping yields low in the U.S., and there is only so long we can see the U.S. decouple from the rest of the world in terms of its economic growth." That decoupling includes the Fed- and rate hikes. Concerns over how soon and how quickly U.S. interest rates will rise could limit gains in the U.S. market- according to a recent Reuters poll. Reuters Markets Editor David Gaffen: SOUNDBITE: DAVID GAFFEN, REUTERS MARKETS EDITOR (ENGLISH) SAYING: "The idea that that is going to happen at a time when other central banks around the world, Europe, Japan are still providing more stimulus, lowering rates or doing something and the ECB, that is the European Central Bank, is definitely at the forefront of this- is causing sort of a marked shift here. People are betting that the economy in the U.S. is strengthening, while the European economy is weakening." The net result: more reasons for the U.S. market to go up than down, but enough headwinds to make a dramatic rally a tougher bet.