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Commercial Property News
Will this recession be a "V" or a "W" ?
Are we seeing the green shoots of a durable recovery, or are we seeing a temporary recovery, induced by the cash governments around the world have pumped into the system, which will when exhausted, allow the system to revert to a recessionary trend?
Robin Bew from the Economist Intelligence Unit says:
"There’s been a number of more positive data releases in a large number of countries around the world. So if you look at anything from kind of mortgage applications to some housing market data, a little bit of retail sales numbers, even some manufacturing data around the world – America, Europe and even in Japan – some of those have ticked up."
"The inventory cycle is starting to turn. At the end of last year, a lot of firms just stopped producing because they had far too much stock on hand, and they’ve now run down their inventories. So production’s starting, which is unambiguously a good thing. But the question is, will that production continue if we don’t see demand start to pick up, where at the moment we don’t really see that".
Standard & Poor’s have put the UK on negative watch and people are talking about a "W" shaped recession , where stimulus expires, recession resumes and further stimulus is tried as governments generally and our government in particular struggle with debts and funding further borrowing. because sterling is not a must-hold-currency it is more difficult for HMG to get it's gilts sold, which raise the risks.
Bew says :
" the credit rating assessments that you’re seeing, this sort of a threat of a downgrade, reflects in part the fact that, like many economies, the UK needs to attract foreign money to fund its deficit. But people don’t have to buy sterling and that clearly poses a risk."
Russell Napier of Hong Kong based CLSA, who is a historian of bear markets, believes stocks will retreat to the extreme valuation lows of previous bear markets (400 or so on the S&P, which is now at 900) before recovering. But as it will take a while for inflation to recur, or for bond yields to rise to the kind of level that has damaged stock markets in the past, he suggests the current upward leg of the W could carry on for a matter of years.
Napier writes : What history suggests, however, is that the worst bear markets do not end with a simple V – which is alarming as the last four months have produced a perfect V on the charts.
Rather, bears tend to end with minor falls followed by incremental recoveries, built on rising volume.
This year has seen a big fall followed by a big rally on shrinking volume, exactly the opposite of this, so it might be best to brace for a W.
Robin Bew from the Economist Intelligence Unit says:
"There’s been a number of more positive data releases in a large number of countries around the world. So if you look at anything from kind of mortgage applications to some housing market data, a little bit of retail sales numbers, even some manufacturing data around the world – America, Europe and even in Japan – some of those have ticked up."
"The inventory cycle is starting to turn. At the end of last year, a lot of firms just stopped producing because they had far too much stock on hand, and they’ve now run down their inventories. So production’s starting, which is unambiguously a good thing. But the question is, will that production continue if we don’t see demand start to pick up, where at the moment we don’t really see that".
Standard & Poor’s have put the UK on negative watch and people are talking about a "W" shaped recession , where stimulus expires, recession resumes and further stimulus is tried as governments generally and our government in particular struggle with debts and funding further borrowing. because sterling is not a must-hold-currency it is more difficult for HMG to get it's gilts sold, which raise the risks.
Bew says :
" the credit rating assessments that you’re seeing, this sort of a threat of a downgrade, reflects in part the fact that, like many economies, the UK needs to attract foreign money to fund its deficit. But people don’t have to buy sterling and that clearly poses a risk."
Russell Napier of Hong Kong based CLSA, who is a historian of bear markets, believes stocks will retreat to the extreme valuation lows of previous bear markets (400 or so on the S&P, which is now at 900) before recovering. But as it will take a while for inflation to recur, or for bond yields to rise to the kind of level that has damaged stock markets in the past, he suggests the current upward leg of the W could carry on for a matter of years.
Napier writes : What history suggests, however, is that the worst bear markets do not end with a simple V – which is alarming as the last four months have produced a perfect V on the charts.
Rather, bears tend to end with minor falls followed by incremental recoveries, built on rising volume.
This year has seen a big fall followed by a big rally on shrinking volume, exactly the opposite of this, so it might be best to brace for a W.
Tue, 30th Jun 2009