Trading Floor Expert Predicts Positive Economy Growth For Late
on: October 5, 2009, 7:32 am
Floor columnist and Saxo Bank chief economist David Karsbol says
the American economy will return to positive GDP growth in the
second half of 2009; however, the reliance of the recovery on
government spending and inventory re-stocking may mean the growth
is not sustainable.
says consumer deleveraging will continue and demand will remain
subdued. US unemployment will continue to rise over the coming
months, further hindering debt repayments and consumption.
Bank's fourth quarterly financial outlook for 2009 is available
for download on the Trading Floor site, which has been running
since May 2009. Trading Floor gives daily and quarterly outlook
analysis of Forex, Equities, FX options, CFD
trading, and commodities.
Saxo Bank quarterly report is put together by the bank's strategy
team of chief economist David Karsbol, chief equity strategist
Christian Blaabjerg, consulting FX strategist John Hardy and market
strategist Mads Koefoed.
quarterly outlook predicts that monetary stimuli and government
deficits are likely to continue, leading to a 'Japanisation' of
financial markets - higher price-to-earnings ratios and lower
yields on both corporate bonds and treasuries.
added: "Because Western economies are more flexible and able
to embrace the necessary changes, we do not think that things
will get as bad as was the case in Japan.
"However, it is increasingly evident that the current scenario
in the West bears a close resemblance to post-1990 Japan, and
it looks progressively like we have entered a new regime in which
everyone assumes that large companies will be bailed out. This
means that default risk is 'priced out', and we see higher price-to-earnings
ratios and lower yields on fixed income."
maximum stimulus in the rear view mirror and austerity and exit
strategies increasingly on the menu, Forex
trading as a whole may begin to shift away from the rosier
recovery projection that is already priced in. This could likely
mean the exhaustion of many of the trends that are currently in
place in FX, where so many trades are aligned along the ubiquitous
risk appetite axis.
USD short seems to be a vote for the global recovery and has become
the 'newer and better' carry trade. "The very low US yields
and need for external financing and increasing reluctance from
China to buy greenbacks is a toxic cocktail that could drive the
currency even weaker in the near term," Karsbol said.
towards the end of the year, market dynamics indicate a shift
from this year's equity market rally. Global equity markets rallied
59% from the March lows through to August, and looking ahead,
dynamics indicate a shift in performance towards micro trends
and sector-specific growth and valuation stories.
indicators of economic activity are stabilising, but at very depressed
levels. We believe investors should continue to take cyclical
risk through regional allocations, with particular emphasis on
emerging markets over Europe and the US, where it will be difficult
to maintain and improve growth."
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