RSS feedsIn matters to do with markets, I’ve always been something of a contrarian. Crueller readers will take that to mean that I’m usually wrong. The more generous of you might think that the contrarian is someone who is right but far too early. I’m reminded of the 1980s-era City doom merchant who correctly predicted all 17 of the last three bear markets. Having recently read his memoirs, I’m comforted by the prognostications of Alan Greenspan who, in 1996, thought that equity markets were demonstrating “irrational exuberance”. He was right but they continued to demonstrate such traits for another three or four years before finally tumbling.
Having said all that, I’m going to take a punt. As the pub talk turns to the question of whether we are going to have a recession (maybe I go to different pubs than you do), I think we’re going to avoid one. Obviously the signs aren’t good. It has taken about two months for equities to lose all the gains they made in the previous two years, which must tell us something (“Yeah: ‘You’re wrong!’”).
The tens of billions that banks are writing off has a whiff of funny money about it, divorced from the real world apart, perhaps, from the country-sized bonuses that traders may have to forego. And I presume that, if Northern Rock finally hits the wall, Alistair Darling isn’t going to try to get all his money back from taxpayers in one fell swoop.
Obviously our economics columnist Dennis Turner talks about these matters much more lucidly than I do. He argues that the UK, the EU and the US are all in for a period of below-trend growth. Our new IT strategy columnist, Robert Jaques, is clearly a wannabe economist (he’s been called worse things), for he expects a sharp reduction in spending on major IT projects this coming year. Having said that, his list of exceptions security infrastructure, governance and regulatory compliance projects is not unimpressive, so there’s still hope.
The action by the Fed to spring a rate cut on the markets bigger and sooner than expected could be seen by some as a panic move, but brought to mind the sort of prompt, decisive action a kind of ‘financial shock and awe’ that characterised the Fed’s reaction to 9/11, the Crash of 1987, the tiger economies crisis and the implosion of the Russian economy. Hence, even though the Bank of England shows no sign of following suit, I think we’ll just make it. But I’m sure your budgets will rarely be more than an arm’s length away from you over the next few months.
