Market Recession still avoidable
The U.S. housing sector slumps, fewer job growth, stagnant wages, negative savings, high debt, high interest rates, high energy prices — relax, don’t run for the exits just yet. All this only leads to a possibility of an economic recession, as you have probably already heard from your respective media sources. The problem is a conflict of interest. When you have media channels spreading scary news - it sells. On the other hand, when it drives a bunch of investors withdrawing from the marketplace in herds, it only turns the possibility into a more likely event.
Now don’t get me wrong, there is of course reason to “worry”, but not necessarily panic. On Friday, the S&P posted its worst single-day drop since the Shanghai surprise which led to a global selloff on Feb. 27. But a few bad weeks of market turbulence does not tell us there is a recession threatening us. The difficulties that lies in the road ahead of us is the subprime mortgage meltdown, slower job growth, but mainly keeping CONSUMER CONFIDENCE.
As always, what keeps the economy moving, is the consumer. So far, people have cooped positively despite painful asset declines, tightened credit conditions and growing job concerns. When housing dipped, Americans were told not to worry, because equities were so strong and there was still plenty of cheap credit available. Now the markets have given up about half of this year’s gains, the job market is looking more gloomy and bank loans are getting more costly and difficult to attain - all of which point to a lot less borrowing and spending.
IF the consumer decides to pack up and call it a year, and the markets keeping tumbling, then do we need to worry (or rather “panic”). But of course there is always yankee Fed Chairman Ben Bernanke to the rescue at that point. But we can definitely manage without his rescue efforts, at least as of yet.
There is quite a bit of slowdown, and I’m sure there’s quite a bit ahead of us as well. But the main question is: Does all this leads to an economic recession? At this point, I don’t see it happening.
Related Articles