Doom and gloom: Do falling markets mean recession is on the horizon?

Posted: January 21, 2016 in economy
Tags: , ,

MARKETS have begun the year in extremely wobbly fashion. Plunging equities have generated most of the headlines; major indexes in Asia and Europe are now in bear market territory, meaning that they have fallen more than 20%. But fear is visible in other places as well. Commodity prices are sinking. Safe-haven currencies and bond prices are soaring, while shakier ones are getting smoked.Crashing markets certainly seem like cause for concern, and the dreaded r-word is popping up with increasing frequency in tweets and blog posts and news stories. But is it really possible that recession lurks ahead? Manufacturing activity looks weak in many countries, but the high-frequency data in most of the rich world, and certainly in America and Europe, does not at all suggest that a slowdown is underway. Many of the world's prominent economists have declared that the market swoon looks out of step with fundamentals. On January 19th Maurice Obstfeld, the chief economist at the IMF, said that markets appeared to be overreacting to "small bits of evidence". And indeed, updated IMF forecasts released this week predict growth in 2016 across all the big rich economies.Of course, the IMF's track record in this regard is not the best. The Economist recently analysed all of the IMF's country forecasts going back to 1999.Over the period, there were 220 instances in which an economy grew …

via Economic Crisis


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s