The mood in the global economy continues to deteriorate, the mood in financial markets are beginning to improve. Financial markets tend to start to turn up a few months before the first signs of economic recovery, this is quite normal. However, a rapid increase in stock indexes since the beginning of March the bears caught unawares. Meanwhile, the world economy, in fact, did not submit any signs of growth. In the best case, you can talk about the slowdown in the fall, which does not seem to be neither the end nor the province. Problems in the banking system remain unresolved, while in Europe and the U.S. banks still require additional capital. Very soon we will be able to verify this, having already run the talk that several large American banks do not pass stress test, without additional funding. In addition, first quarter for the States marked decline in economic growth year on year by more than 6%.
So, in front of us waiting for more bad news as a dream, and no certainty that the recession will not start a new round of its downward spiral, even after some recovery this year. In this situation begs the question: maybe this is just another increase in the bear market, investors should follow the ancient wisdom of the market "sold in May - the year is free"? There has been a rapid increase in the levels of acceptable risk, therefore, logical to assume that soon we will correct. The first graph shows how the classes of risky assets ahead of the rest. There have been all over the world share of emerging markets, followed major markets, the most risky corporate bonds grew more confident the investment, but at the end of the list were the state. United States bonds, which traditionally are considered the most secure (although now many do not agree with that statement).
It is this dynamic, as a rule, formed to restore confidence. Recently, the markets are paying much more attention of leading indicators, in particular, business sentiment. While retarded indicators such as GDP per 1 quart of Great Britain and the United States remain in the shade. You can also note that the pig flu almost did not affect the stock markets, even in Mexico, which is quite remarkable. But the fact of the growth levels of allowable risk makes the market vulnerable and pointed to the possibility of correction. Yet today investor community is inclined to the fact that confidence is beginning to slowly recover. Encouragingly, however, is that Barclays analysts can make mistakes. While stocks showed better results than a timetable drawn up by a few days ago. Now the world's stock prices reached a four-month highs. It seems that investors believe the current crisis a severe recession, do not have anything to do with depression in the style of 30-ies.
While continuing to develop this theme, you can make some assumptions about the extent of recession. At the last assessment schedule reflects Barclays for the world economy, both developed and developing economies. It is clear that the procedure will repeat the reconstruction process out of the recessions 1970 and 1980 for the developed world, and will be much harder than in the early 1990's and early 2000's. For developing economies, the process will remind the 1980's and 1990's, but it would be worse than in the 1970's and 2000's. For the world as a whole, this crisis could be the worst since the Second World War, but nothing unheard of. These values, in general, consistent with our estimates. When all is finished, will become apparent that Britain has experienced the crisis more easily than in the 1980's. For many, this is cause for optimism, especially when considering how often we matter, that this is the worst recession since the Wars of Roses, or even from the beginning. It feels that the government is trying to catch up with fear, trying thus to justify their incompetence in the management of state finances. Of course, the government has every reason to assert that the situation was slightly worse than they anticipated, but it was not out of a series of remarkable.
So what can break this sudden optimism? Here are a few options.
Option first. Markets accustomed to the idea that economic recovery is quite stable, but it turns out that this is not the case. This summer may start rollback, as stocks start to decline, but the core consumer demand remains very, very modest, in addition, the household is a lot of debts to be paid. From a practical point of view, the global housing market has not yet reached its bottom and while it does not, consumers will be cautious. Problems also arise in connection with the growth of taxes and decrease in consumer spending.
Option Two. Will inflation, which would require introducing stricter measures by the monetary policy before the fragile global economy would be able to make. So far, this seems unlikely. Prices for raw materials and energy are kept at low levels. Wages in the private sector is also in no hurry to grow. Other asset classes also are under pressure. But in any event, uploaded to the economy of the money will start to do its work. Previously, we have never made such innovative measures, so little aware of what all this could lead to long term.
Option Three. Serious and adverse changes in global trade. We know that these processes are severely affected, however, can not yet assess the impact on whether the destruction of globalization, and not waiting for us whether the setback in the past, with all its sad consequences. Already it is clear that international bank flows have stopped, but it is not yet clear, it lead to a larger outflow of investment. In general, the entire system remains very vulnerable, and in the coming months, it can affect even greater. The crisis has not yet ended, even though some glimmers of prolonged clouds on the sky.
So, in front of us waiting for more bad news as a dream, and no certainty that the recession will not start a new round of its downward spiral, even after some recovery this year. In this situation begs the question: maybe this is just another increase in the bear market, investors should follow the ancient wisdom of the market "sold in May - the year is free"? There has been a rapid increase in the levels of acceptable risk, therefore, logical to assume that soon we will correct. The first graph shows how the classes of risky assets ahead of the rest. There have been all over the world share of emerging markets, followed major markets, the most risky corporate bonds grew more confident the investment, but at the end of the list were the state. United States bonds, which traditionally are considered the most secure (although now many do not agree with that statement).
It is this dynamic, as a rule, formed to restore confidence. Recently, the markets are paying much more attention of leading indicators, in particular, business sentiment. While retarded indicators such as GDP per 1 quart of Great Britain and the United States remain in the shade. You can also note that the pig flu almost did not affect the stock markets, even in Mexico, which is quite remarkable. But the fact of the growth levels of allowable risk makes the market vulnerable and pointed to the possibility of correction. Yet today investor community is inclined to the fact that confidence is beginning to slowly recover. Encouragingly, however, is that Barclays analysts can make mistakes. While stocks showed better results than a timetable drawn up by a few days ago. Now the world's stock prices reached a four-month highs. It seems that investors believe the current crisis a severe recession, do not have anything to do with depression in the style of 30-ies.
While continuing to develop this theme, you can make some assumptions about the extent of recession. At the last assessment schedule reflects Barclays for the world economy, both developed and developing economies. It is clear that the procedure will repeat the reconstruction process out of the recessions 1970 and 1980 for the developed world, and will be much harder than in the early 1990's and early 2000's. For developing economies, the process will remind the 1980's and 1990's, but it would be worse than in the 1970's and 2000's. For the world as a whole, this crisis could be the worst since the Second World War, but nothing unheard of. These values, in general, consistent with our estimates. When all is finished, will become apparent that Britain has experienced the crisis more easily than in the 1980's. For many, this is cause for optimism, especially when considering how often we matter, that this is the worst recession since the Wars of Roses, or even from the beginning. It feels that the government is trying to catch up with fear, trying thus to justify their incompetence in the management of state finances. Of course, the government has every reason to assert that the situation was slightly worse than they anticipated, but it was not out of a series of remarkable.
So what can break this sudden optimism? Here are a few options.
Option first. Markets accustomed to the idea that economic recovery is quite stable, but it turns out that this is not the case. This summer may start rollback, as stocks start to decline, but the core consumer demand remains very, very modest, in addition, the household is a lot of debts to be paid. From a practical point of view, the global housing market has not yet reached its bottom and while it does not, consumers will be cautious. Problems also arise in connection with the growth of taxes and decrease in consumer spending.
Option Two. Will inflation, which would require introducing stricter measures by the monetary policy before the fragile global economy would be able to make. So far, this seems unlikely. Prices for raw materials and energy are kept at low levels. Wages in the private sector is also in no hurry to grow. Other asset classes also are under pressure. But in any event, uploaded to the economy of the money will start to do its work. Previously, we have never made such innovative measures, so little aware of what all this could lead to long term.
Option Three. Serious and adverse changes in global trade. We know that these processes are severely affected, however, can not yet assess the impact on whether the destruction of globalization, and not waiting for us whether the setback in the past, with all its sad consequences. Already it is clear that international bank flows have stopped, but it is not yet clear, it lead to a larger outflow of investment. In general, the entire system remains very vulnerable, and in the coming months, it can affect even greater. The crisis has not yet ended, even though some glimmers of prolonged clouds on the sky.
From The Independent Online
No comments:
Post a Comment