Market Forces Navigate Sea of Turmoil

Debt troubles in the US have cooled the Australian market, with the ASX 200 dipping below 5200, according to the Australian Financial Review.

Shane Oliver, an analyst for AMP, said the trading conditions as very messy. The situation is not being helped by politicians around the world adding to the uncertainty with destabilising rhetoric and policy. Markets in Hong Kong and Japan were also down 1% this week.

Investors are expected to become more passive until conditions become more settled.

The market hit a similar low in 2011 after the last US debt ceiling debate. The resolution to that crisis spurred strong growth that may now need to be corrected.

October has historically been associated with significant market shifts, both positive and negative.

Derivatives are currently very cheap, particularly put options. The low price is due to the minimal market demand for protection. This implies traders are optimistic the debt difficulties will be solved.