"So tell me what the markets are up to right now?" - How do I answer this correctly?

generally for this type of question you're also going to want address a few things. Performance of U.S. equities by sector according to corporate earnings and forecasting about economic growth, unemployment, housing, inflation/Fed policies etc. (maybe mention the flood of activity in tech last year), International markets and implications on FX (like the Euro crisis you mentioned, China/Brazil/India and inflation), Commodities (oil and gold, specifically), Overall volatility in the markets, Treasury Yields

A few things? You could talk for 20 minutes about that stuff bulldogs.

"What aren't the markets up to?"

going up, going down, or staying the same.

Try to focus on the numbers and objective facts. Then wait for them to ask your opinion. Don't just volunteer it.

When they challenge your view, be prepared with a couple of questions. "What about the Bakken shale and declining unemployment rates in the midwest? Isn't that good for the economy?"

They want to see facts and strong analysis. Really strong analysis. With this kind of a job market, being brilliant is not sufficient to land somewhere, but it is getting more and more necessary.

Remember, when they want your opinion about what is happening and what you think is going to happen, that is just what it is:an opinion. The interviewer has no better idea of what is going to happen than you do, he just wants to see if you can form an opinion/strategy and back it up. Its his job to play devil's advocate.

Make sure you stick to your opinion and have strong analysis and facts to back it up. And be polite about it, don't start a argument or seem like your cocky and know more than you do, but just be willing to defend your views.

I would be ready to touch on a few things, as noted above (EU, US rates, US economy, China), but be ready to delve deeper into one area, which should be the crux of your market outlook.

"blah blah, US, China, blah... but I really am doubtful on the Greek PSI. Even with significant haircut, you are still talking about Greek Debt/GDP of 120% by 2020, if not worse, which makes the current haircut appear like rearranging deck chairs. The PSI itself will be a lesson in unintended consequences - is it a default re: CDS? What will investors think when asked to backstop Italy or Portugal? Therefore, I think this will remain a headline and headwind for the foreseeable future"

Point is, if you try to come off as an expert on all things, you should expect follow up questions that will likely expose that you know little more than headlines across broad areas. Better to be an expert in some areas - which is essentially how financial markets / hiring is done.

Do not talk about the euro debt problem! That is the most obvious answer and every other candidate will bring it up. Europe is a non factor going forward in the global economy, if they were a factor the dow wouldnt be near 12.5k. Yes every once and a while some bad news about euro leaders inability to push austrian cost-cutting measures will cause the market to swing negative for a day, but europe postcolonialism is significant in its cultura offerings not economic.

Go to the Fed website and review some macro data. For example, under economic research a report shows that industrial production has increased for the 10th consecutive quarter. That is news that will cause the market to trend upwards. Take that report and tie it into with Fords record profit. Then throw in some talking points about the BRICS and you should be good.

Easy answer.

2011 as a whole ended pretty flat. Investors expected gains out of the emerging sector, but got fucked by China and most of the EM field. Didn't help that Europe fucked themselves along with the world adding volatility to an already scared market. U.S. equities generally were the safe haven of 2011, compared to other countries. U.S. companies are sitting on record amounts of cash and seem to be in fundamentally great shape, but that could hint at a disaster to come.

Mention an article that you read that mentions any of these issues and go into detail if asked. The key thing to focus on is th volatility int he market and the lack of options to general consistent returns that beat inflation. (it used to be U.S. treasuries but with interest rates at record lows, money managers have to find alternatives)

Mention facts, not opinions. Don't mention something if you can't have a solid conversation about it. If you don't know something, admit you don't know. If they press, say "based on this line of reasoning, I would imagine this..." Like somebody else mentioned, it's a great question because it both tests your passion for the markets as well as your critical thinking abilities, all while putting you under a good bit of stress from the interviewer who will be playing devi's advocate with you, just as any good colleague would on a trade floor.

This is a backward-looking question (based on how you phrased it). If you start making predictions, you're digging yourself quite a hole.

porsche959, I like your reasoning, however one thing I may add is that, while corporate earnings are there, demand is not, and the only reason earnings are as good as they are is because companies are running so lean and not hiring. Record earnings with unemployment at 8.5-9% is not healthy.

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Interviewers want to hear you logically link different aspects of the economy and how one aspect has affected other industries/markets/currencies/commodities/etc. So what EU sovereign debt crisis is going on, but what does that mean for the overall growth prospects and exports for China? How is new regulatory concerns and uncertainty going to affect the cost of funds for banks and commercial lending? Try to make key connections. They don't want to hear you blather random facts.

You should expect them to disagree with you unless you somehow manage to give a pitch perfect explanation that gels with what your interviewer is thinking that day. Even then, some people will challenge you to see how you respond. So if you're going into this thinking, "If I say the right thing, I won't get 'shot down'", you're likely to be disappointed.

From my perspective as an interviewer, which I imagine most market oriented people will share (can't speak for bankers or deal guys), I would much rather you stick to something you know something about and give me a coherent answer to the question. Don't try to list a bunch of things to sound smart. If you're interviewing anywhere at all reputable or competent, you'll look like an idiot if you do that. Focus on data which you've selected because it tells a coherent story and then, if asked, give your analysis of that data. Do not try to cover every piece of information which might be relevant, but be prepared if they bring something up that you didn't mention to challenge you.

I don't think that this question really shouldn't be that hard, but people seem to fuck it up a lot.