The list of temporary setbacks to the US economy, and then, circuitously, to equites and the stock indices just keeps growing. And these temporary setbacks are joining hands to form a continuous chain.
What have we had recently?
-Commodity price inflation. Yes, temporary, they are easing somewhat. I was very concerned about oil prices and their impact on consumers. While prices have dropped, the drop has stabilised and even reversed to a small extent. My concern is becoming rekindled. Not so temporary just yet.
-The earthquake and tsunami in Japan. Temporary supply disruptions. Seemingly recovering well and quicker than expected. Good.
-European woes. Greece etc. This is not going to go away, not without a lot more turmoil.
-The debt ceiling issue, another temporary setback, has grown and grown. And keeps growing (I’m hoping my blogging this is contradicted by a resolution, leaving me with egg on my face. Please, please, US Congress, reach an agreement, if not for the good of your country then do it just to embarrass me).
These ‘temporary’ setbacks, like I said, are joining up with each other. A chain of setbacks. I suppose it could be worse, they could have all come concurrently.
David Rosenberg, not my favourite pundit for his persistent bearishness in the face of a strong and rising US equity market over the past two or so years, has recently said:
“The U.S. economy is floundering, and the fact that monetary support has subsided incrementally, fiscal policy is shifting towards radical austerity at all levels of government, and leading global economic indicators are rolling over, all suggest that the downside risks to the economic outlook are acute.”
Price action is lending more and more support to this type of view. The risks are reaching the acute stage.
The bear point of view is becoming increasingly helpful to traders.