Similarly, investors would love to know if the return of market mayhem on
Thursday should be dismissed or if it is a portent of things to come.
Unfortunately, for all the plunging equities and bond yields, it is still
too early to say.
Certainly there were some soggy economic numbers out of America on Thursday;
the Philadelphia-area factory index falling to minus 31 in August versus a
consensus of positive 2 was particularly soft. So were housing starts.
Nothing different
But the US recovery has been characterised by fits and starts since coming out
of recession more than two years ago. There has also been better news
recently. July US retail sales, for example, looked pretty good, as did the
recent earnings season.
Likewise, the eurozone mess rumbles on and, while the German economy may have
stalled, the growth engines of China and other emerging markets are still
humming. That the European Central Bank had to supply $500m of dollar
funding to one local bank sounds ominous, but may prove exceptional.
Besides, anyone who was not already worrying about European banks was
foolish. Nothing is different this week.
Confidence lost?
What would be quite a nasty sign, however, is if the Federal Reserve followed
up its promise of prolonged low rates with a third quantitative easing
programme and equities were to get a lift as brief and anaemic as that of
the past week. It would mean that confidence truly is lost.
Today, investors in countries such as the US and Germany seem to be wavering
between bouts of bargain hunting and saying there is nothing more attractive
over the next decade than the 2 per cent annual return from Treasuries and
Bunds. But, for now, it is wrong to think such gloom is permanent.
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