I’m not normally a fan of media like CNBC. They serve a purpose, sure, and there may well be good reasons for a short-term trader to watch such media live (though none of these has so far convinced me to do so), but this is a must-watch clip. There are plenty of reports around of ECRI now calling for a recession, but none of them manage to convey the level of conviction Lakshman Achuthan has in his call.
Given the ructions in Europe (& therefore coming recession), the destructive debt debate debacle in the US (& therefore coming recession), and the slowdown in the developing markets (not recession, yet, but significant slowdown, at least, nonetheless) the potential implications for S&P500 earnings and (following on from this) prices, are serious.
The question now turns to how much of the recession fears have already been priced into this market? I think there is more selling to come, but, again, we have to be sensitive to the fact that sentiment is extremely bearish, so I don’t expect a collapse. So far the 1100-1120 level has been support (apart from the spike below there in the overnight of the first debt-debacle derived S&P collapse). Friday’s close is not far from there, these new recession fears should be enough to set up a good test of this level next week, at the least. Day-/short-term traders take note.
And a ps. – take note of Achuthan’s response to the question (near the end) of how severe this recession might be … “Unknowable”. The mark of a man who knows his stuff:
Tetlock found that the best experts were uncertain, because that kept them thinking about it.
From my post, here: https://financialmarketstrading.wordpress.com/2011/09/29/experts-are-full-of-it/, originally from this article: http://www.thestar.com/living/article/1060063–q-a-an-expert-on-experts-tells-how-to-spot-the-bad-ones
EDIT: Updated – Two other interviews with Achuthan, at Yahoo and WSJ, on the Credit Writedowns blog.
Find the interviews here, at the Credit Writedowns blog.
EDIT II: Update with Bloomberg interview, on the Bonddad Blog.