Finance

Predicting short term stock market performance is extremely hard and has been called a futile exercise by many in financial academia and professional circles (BPP, 2008). This is because, due to the inefficiency of stock markets with regard to information asymmetry,  many of the fundamental factors effecting stock market performance do not fully reflect themselves in stock prices in the extreme or near short term.

However, despite the above, a general guide (as opposed to quantified prediction) is provided below of the expected short term performance (covering the period from January 5th to April 05th 2010 ) of two major international stock markets the New York Stock Exchange (NYSE   with the Standard  Poor 500 (S  P 500) Index as our main subject of analysis) and the London Stock Exchange (LSE   with the FTSE 100 (Financial Times Stock Exchange 100) index as our main subject of analysis).

New York Stock Exchange  S  P 500 Index
Following the sub prime mortgage crisis, the ensuing credit crunch and the resultant global economic meltdown which plunged the world into a global recession, the US administration responded with fiscal stimulus measures (including a 787 Billion fiscal stimulus plan and the cash for clunkers scheme), near zero interest rates, a plan to buy troubled assets (the 700 Billion TARP), funding of commercial and investment banks to help them shore up their balance sheets and extended government support to save jobs through nationalization and restructuring of car manufacturers Chrysler and General Motors (Financial Flicker, 2009).

All of the above have now started showing results with many banking companies (once battered down by the financial onslaught) returning to profitability along with many SP 500 companies returning to profitability as consumer spending increases and job concerns are alleviated.

It is expected that this momentum in financial markets will continue going forward. However, concerns over the strength of the recovery will remain prevalent with US economic date, most particularly on unemployment and consumer spending, to look out for as the same can dent investor expectations. Apart from this, by and large, the stock market will continue its upward march.

London Stock Exchange  FTSE 100 Index
The effect of the sub prime mortgage crisis hit the British economy hard with Londons place as the center of international finance severely dented as a result of the credit crunch and the global economic slowdown. The nationalization of mortgage specialist Northern Rock and the too big to fail types of RBS and HBOS prompted the rise of Singapore, Hong Kong and Shanghai as new centers of financial services. Insurance and shipping also suffered declines as a result of a drop in world trade. All of this has had adverse effects on the services driven British economy (Financial Flicker, 2009).

The government has responded with measures aimed at restoring trust in financial markets coupled with monetary policy easing the way for consumer spending to pick up. However, these measures are in effect long term solutions aimed at bringing London back in the international lime light with little attention being paid to short term fiscal stimulus.

Hence, going forward, the FTSE is expected to remain range bound with market performance as a whole largely depressed (Schweser, 2008). Overseas income by British multi nationals will drive positivity, especially for those companies whose operations are located in the rebounding Asian market.