“The storm clouds are worldwide.”
In the Eye of a Storm?
by Sy Harding
May 14, 2010
Living in Florida I’ve been in the eye of several hurricanes. In the eye, one side of the storm has passed and there is great relief. There’s some rubble and signs of destruction, but the sun is shining. We begin to pick up the pieces. There’s a hopeful feeling the danger has passed. Then you listen to the weather forecasters and learn it’s just a temporary respite. You’re in the eye of the storm. The other side of it is about to arrive, sometimes with more fury than the first side.
Unfortunately, economic radar is not as advanced as weather radar.
However, we can look at conditions off in the distance and surmise whether what was just experienced was an isolated financial cold front passing through, or ongoing problems that have us in the eye of a storm.
In January, global stock markets declined in a 10% correction on concerns about a potential government debt crisis in Greece, and initial moves by China to slow its economy. But the clouds blew over and most stock markets recovered.
Three weeks ago the storm re-gathered, and global markets began to decline again. The debt crisis in Greece turned out to be real, and this time there were also fears it would spread to other European countries. There were also more fiscal moves by China to slow its economy.
The market’s decline worsened with a 1000 point intraday mini-crash (and quick partial recovery) a week ago Thursday, and another triple-digit decline the next day.
Fears of a real crash then circled the globe, pushing European leaders into panicked secret meetings over the weekend. The surprise announcement that came out of those meetings last Sunday night, of a massive $trillion rescue plan for troubled European countries brought instant relief.
The sun came out on Monday, with most global markets soaring. But there was no follow-through. The market was down three of the last four days.
The eye of the storm?