Bond Outlook January 28 2010
It is a case of economists versus traders. Guess which are optimistic and which pessimistic. Which are right? Just as important, which view is gaining credence?
Bond Outlook [by bridport & cie, January 27th 2010]
The Obama/Volcker plans to reform the banking industry have set back financial market optimism, although majority opinion still seems to lie in favour of a sustainable and solid recovery. Our own view remains that GDP growth in the West can only be very modest – what we have described as the long horizontal leg of the L-shaped recession. There are those whose views are even more pessimistic than ours, of which there is a fair representation in the line up at Davos. The pessimistic view is reflected by the “economists” such as Roubini, Roach, Stieglitz and to some extent, Soros, while the “traders”, with spokesmen like Biggs and Doll, reflect the majority, optimistic view. A similar division of views can also be obtained from observing the various writers in the FT. By way of example, Authers writes of “risk aversion growing”, while Funnell sees a 70% chance of a “normal” or even a “good” recovery (and only 30% chance of a more gloomy outlook). Funnell nevertheless has a proviso for his optimism, “the key is the US employment market; without its recovery a general recovery is certainly doomed”.