The stock markets have been on a tremendous run over the last six months – but a large group of investors is still sitting on the sidelines, watching nervously and refusing to put their money back into the markets.

Part of the problem is the positive economic reports and forecasts of recent weeks haven't made most consumers feel better about anything regarding their personal financial situations. And to top it all off, news of rising food and gas prices, widespread unrest in the Middle East and looming state budget cuts have heightened fears that economic conditions are bound to become worse.

Not Confident About Consumer Confidence

"John Q. Public is not feeling the same thing the government is saying about there being no inflation, and that consumer confidence is high," says Ken Polcari, managing director of broker dealer ICAP LLC (IAPLF). "Every day they see the price of food and gas keeps going up. If you have to spend more money on food and energy, you have less money to spend on everything else."

Polcari, who trades equities on the floor of the New York Stock Exchange, believes keeping in touch with how average Americans feel about economic events can often provide clues to where the markets are headed. And while he remains optimistic that long-term market trends will be positive, Polcari believes consumer angst and nervousness over world events may soon start to influence short-term market movements.

Investors may want to take note -- because if consumer confidence starts waning, the economy and financial markets might swoon along with it.

In his daily blog to clients recently, Polcari listed his top nine reasons investors are nervous now:

1) What will the end of QE2 mean for the markets?
The end of the second round of quantitative easing (QE2), the Federal Reserve's massive $600 billion capital infusion into the financial markets, presents a major concern for investors. Stocks have risen nearly continuously since the program first announced in August 2010. So, it can be argued this is a "Fed-induced" rally -- and that market confidence will disappear in June when QE2 is set to end. "Unless the market is healthy enough and strong enough to support itself, you would expect the market to pull back," says Polcari.

2) The looming federal government shutdown.

Now working with a two-week reprieve, Democrats and Republicans continue their threats to walk away from the table as they fight over budget cuts. While it's unlikely either side will shut down the government, some investors shudder to think of the chaos and market mayhem that could ensue if they did -- concerns like a scuttling of the economic recovery, massive layoffs and a ripple effect of state government shutdowns due to discontinued government funding.

3) Political unrest in the Middle East and the effect on oil prices.

The markets are already affected by instability and tensions in the Middle East. "It creates nervousness -- people are going to sell their equities and put the proceeds into cash or gold," says Polcari.

Rising oil prices have sparked market sell-offs -- because the escalating price of oil is causing nearly everything to increase in price worldwide. Transportation costs, airline prices, creation of food and energy as well as the production of thousands of products are all increasing due to the disruption of oil supplies.

4) Political unrest in the U.S. as states battle unions over pay and benefits.

With 40 of the 50 states dealing with budget woes, fights over pension and health care benefits may have a major impact on whether states can balance their budgets or go into default. The battles with unions in Wisconsin and Ohio will are being watched carefully. "That is potentially going to cause a ripple effect through a number of states," says Polcari. "If they succeed in curtailing collective bargaining rights, other states are going to get on that bandwagon."

5) Recently downgraded GDP numbers.
The downward revision of U.S. gross domestic product projections isn't a good sign, and if oil prices continue to spike, GDP may be revised even lower. If GDP gains falter, confidence will wane and markets will react badly.

6) Continued housing market weakness.
Residential real estate isn't getting any better -- and with energy prices going up, property taxes increasing and home values still dropping, there's less incentive to buy a home now than in years past. If interest rates begin to rise, new mortgage costs will rise as well – which will keep the housing market subdued. It's hard to see a strong recovery without housing.

7) Worldwide inflationary pressures.

Although the Fed says U.S. inflation is low, people in other parts of the world are feeling its wrath -- in the form of skyrocketing food and energy prices. The result? "People are rioting," says Polcari. Political unrest is sweeping across the Middle East at least in part because people can't take care of their families as prices skyrocket. Don't think it can't happen here.

8) Continued high unemployment and lack of job creation.
Until the unemployment rate falls below well below 9% (February's report finally squeaked past the 9% mark at 8.9%), most people will continue to believe the current administration has failed to create an environment that can support strong job creation. Without job creation, markets are likely to sputter.

9) The continuing European debt crisis.

While this crisis may have fallen off the media's radar screen for the past month, the debt problems of Portugal, Ireland, Greece and Spain haven't been resolved. A default by any one of these nations would shock world markets.

All of these issues could have serious ramifications for U.S. stock markets, but there's no certainty that any one of them will unfold in a negative way. In fact, the stock markets have continued to rally in spite of most of the nine issues mentioned. Investors can only hope that trend will continue.


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Dereck

Major Fraud Alert


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May 29 2011 at 12:24 AM Report abuse rate up rate down Reply
MY LORD

The real nine reasons investors are nervous 1) Obama 2) Obama 3) Obama 4) Obama 5) Obama 6) Obama 7) Obama 8) Obama 9) Obama

March 30 2011 at 9:38 PM Report abuse +1 rate up rate down Reply
inasctg56

Breaking news from Nightly Business Report: ADP (payroll processing) just announced 201,000 jobs added to the private sector. That makes an average of 211,000 jobs per month for the last four months. LLC reports, “It’s pretty clear employment has in fact accelerated.” And tarp loans are in the black with $6 billion profit; 99% of loans paid back. Manufacturing and exports up for 19 months and unemployment declining.
Thank you President Obama!

March 30 2011 at 9:27 PM Report abuse rate up rate down Reply
1 reply to inasctg56's comment
MY LORD

LOLOL what baloney

March 30 2011 at 9:36 PM Report abuse +1 rate up rate down Reply
Vinny

The Washington 'bubble' that surrounds Obama has sapped any intelligence he once had. He is making a clown of himself proclaiming that ;inflation is under control'. Why ? Because he's totally isolated from where the average American shops or works and his 'advisors' are from the top ranks of GE and similar corporations that pay ZERO taxes, yet he listens to them and the idiot takes their councel and 'advice'. Obama is a FOOL and I helped elect him. Into the third years of his 'reign' and I see NO CHANGE only the change that HASN"T COME. We are going to have to stomoch the same CRAP next year, but I for one won't be listening. Been there, done that. Time all of the Tea Buggers, all of the Republicans, all of the Democrats were VOTED OUT OF OFFICE. They are incapable of running this country and that's evident to even the most dumb of us. Obama is a HUGE disappointment to me because he turned out to be a kiss-ass politician with no balls. Time he took a hike.

March 30 2011 at 5:10 PM Report abuse +1 rate up rate down Reply
Harleygent

The article from a stock market perspective is concise from an investors point of view and the order OK except for the government shut down part which is probably last in order of importance. We now live in era of quick bubbles and shortages. This is not because of the rich, they don’t hold their assets in cash but mainly investments, not because of the greedy because they usually get caught or identified eventually and make most of their money off those that want to be alike but can’t make it. It is where we as human beings are today especially with this instant mass communications of sometimes useless, worthless and the usual misrepresenting of reality. Our government now looks to control and micro manage every crisis instead of letting them take their course. ie. The FED can not lower interest rates any more too help boost the economy. Bonds, mortgages, and loaning will falter if they now raise them Even the Bible hated but believed in the Money Changers as a process of society and they did not lend at 0% to the big and 5% to the individuals. Bigger social, economic and in reality technical problems have pretty much stymied any progress also. Science is dead, technology is deader, medicine is dead, and social engineering is dead. Nothing is really new in any of those areas and what they produces never comes to real fruition. We commute on the air, sea and ground slower that 40 years ago, we still use the same radiations and poisons to try and kill cancers in patients we used 40 years ago. Our drugs are now as dangerous as the disease, new critters are beating the best antibiotics and genetics has come up with pretty pictures of what happens but no cures. We can communicate in seconds but we still don’t know where we are and where we are going. Cold fusion turned a better movie than reality and car’s were made more efficient by weight reduction. The Japanese lowered their interest rate down the past 30 years and look what it has become, a 10,000 Nikkei index from a previous 1980 Nikkei at 23,000 and higher. We have to let financial economics run their own courses with minimal government intervention. It will be quicker but less painful in the long run. GM in bankruptcy would of came back without the government holding $55 million in their stock. The world is really flat except for it growing population and that will be it’s future demise by not dealing with it? We have a Government Industrial Complex, Military Industrial Complex, Financial Industrial Complex, Medical Industrial Complex and a Media Industrial Complex. They all need to go. In other words, we the individual investor are screwed! I'm getting out for now!

March 30 2011 at 2:39 PM Report abuse rate up rate down Reply
SoquiliAsgaya

The fact is that the neo con corporate government welfare companies are sitting on 2 trillon dollars made off our government just waiting to see if Obama is reelected for 4 more years. The neo con republicans in congress are doing everything to defeat Obama, even if it means cutting much funds for repair of antiquated infrastructures that shall cause many Americans to die, kill what they call ObamaCare and do what gwbush wanted to do before the great recession and invest SSI in the stockmarket. They have no compassion for life especially the blood for oil and opeium wars in Iraq and Afganistan which have cause more premature abortions, slaughters of civilians and your imperialist gwbush said that saddam hueseinn was an evil man. What does that make your jr.? A war veteral hero?

March 30 2011 at 1:28 PM Report abuse +2 rate up rate down Reply
1 reply to SoquiliAsgaya's comment
jnickell51

Save us all and stay in the house.You no doubt have your degree on the wall from graduating the third grade. Don't worry the rest of us will feed and protect you. If you don't know anything please keep quiet........ or better yet just shut-up. Save your welfare checks and get the hell out of my country.

March 30 2011 at 7:27 PM Report abuse -1 rate up rate down Reply
rhrealestate

Lets get the country out of debt and do the patriotic thing, sell all of your stocks and buy US savings bonds, your return may be lower, but obama will have more of your money to work with or give away

March 30 2011 at 12:21 PM Report abuse -1 rate up rate down Reply
rhrealestate

I hope the big investors take a big hit like us middle class folks...

March 30 2011 at 12:17 PM Report abuse +1 rate up rate down Reply
1 reply to rhrealestate's comment
SoquiliAsgaya

We will bail them out again. They rule and own the New World Order that ghwbush told you about. What about it donald trump?

March 30 2011 at 1:29 PM Report abuse +1 rate up rate down Reply
FINLWJIM

It seems you miss the elephant (no pun intended) in the woodpile. The continuous conservative ( read crook) attempts to dumb down any securities and business flim flams with adequate investigative follow up. Until then my millions are staying put where the republicans can not dumb down controls with their specious and laughable statements about funds control without consideration of long term deletarious effects on the infrastructure of the country.

March 30 2011 at 10:42 AM Report abuse rate up rate down Reply
obrienbuck33

Thanks Bill Clinton for your implimentation of Nafta and deregulation. It has had wonderful effects on the ignorant sheeple just like you knew it would. Meanwhile the chosen one lacks the gonads to suggest China take a front seat in Libya.After all ,China is their biggest customer.Instead they are steady at manufacturing cheap goods for our consumption and loansharking the U.S. into more and more debt while we run security for the world.Stinkin' gutless lefties.Funny how they act as if their head will be spared once this global conflict reaches their backyards.

March 30 2011 at 9:33 AM Report abuse -2 rate up rate down Reply
1 reply to obrienbuck33's comment
SoquiliAsgaya

You are thanking the wrong one stooge. Check you history and remember the banking and stockmarket deregulations of ronald reagan. It is not true because I said it, it is true because it happened on the jelly beaners watch just like 9-11 on juniors watch. Not Bill Clintons. In other words, you are wrong.

March 30 2011 at 1:32 PM Report abuse rate up rate down Reply