- Investor anxiety has risen with the threat of recession both in the U.S. and globally, as well as with the continued European debt crisis struggle.
- The “risk off” trade permeated the global markets in September. Compounding losses from the preceding two months, the result was the worst quarter for stocks since the fourth-quarter 2008.
- Falling yields, increasing fears, and multiple sources of global uncertainty were tailwinds for high-quality bonds in the third quarter. Both the global fear trade and additional Fed intervention, the so-called “Operation Twist,” brought the 10-year Treasury yield to the lowest levels on Fed record.
- Economic growth in the first half of 2011 was anemic. Expectations for growth in the second half are also challenged given the pronounced slowdown underway.
To Dip or Not To Dip…
A little over two years have passed since the end of the so-called Great Recession, the end of which was dated as June 2009 according to the National Bureau of Economic Research (NBER). While having no sanctioned authority, the private, nonprofit NBER has become most widely recognized as the unofficial arbiter determining turning points in the business cycle. Their organization is an esteemed one, and their process for making those determinations are cautiously deliberate, focused on accuracy over timeliness. The result is that a declaration of recession or recovery by the NBER is newsworthy. The problem for those who would use that information to trade the markets is that it only occurs well after the actual turning point has transpired and is generally widely understood by both economists and the markets. Not surprisingly, the NBER has thus far been silent on their assessment of the state of the economy. We’re not likely to hear from them for some time, even if the economy were to tip into recession today.