As global government debts climb higher at a frantic pace to bail out insolvent financial institutions, global equity markets are having an incredible rally. Will these massive injections of liquidity, equity stakes and balance sheet asset swaps effectively quell the confidence and earnings issues, enabling banks to lend again and generate profit? Or will new regulation clamp down on banks’ ability to make a profit?
We believe that while there has been an impressive rally off of what may be the lows for this sell off, we don’t see a new catalyst for a recovery. We doubt financials we lead us out of the crisis and obviously another looming problem is the real recession.
Unemployment is due to spike, given that layoffs have been accelerating around the world. Add to that many baby boomers that may not be able to retire and instead could pick up hours to rebuild their savings. We could see a very stressed job market.
At this point we’re watching all the economic indicators, headlines about company employment force consolidation and will report back when we more information about the outlook.
