A global economic and stock market recession? Watch this space...
The industrial manufacturing numbers, for the month of October'06 in India, came as a shock to many, who had taken growth almost for granted. It struck the lowly 6 odd % mark, for people who were used to the number hitting 13% routinely. The next day the stock market tumbled in a heap.Many analysts predict this will be only a blip and the numbers will hit the usual range, from Nov'06 onwards. Hmmm...who knows? Investors are jittery and the markets are bound to be volatile, with people betting on both sides of the growth debate.
While we debate this topic in India, its useful to remember that the U.S.A is going through its own growth pangs. Except, the question being posed is not whethereconomic growth would surpass over what it was last year- but how far down the line, the U.S economy would recede. The much criticized, over leveraged housing market has finally collapsed in the U.S. A few friends I know who had cancelled their house buying plans, due to prices reaching stratospheric levels in California, where, reportedly, most of the excess occurred, are again contemplating whether they should make the purchase. This might mean two things: The housing market may not totally collapse and therefore the recession won't be that steep. Or, it might just be that we haven't hit the bottom of the U.S housing bust and there is more pain ahead, at the end of the barrel.
This has profound impact on the performance of Indian economy and therefore the Indian stock market, of course. For Indian investors invested moderately to heavily in the market, it would pay well to keep an eye on U.S economy numbers on a periodic basis and pull out at the first signs of trouble there. After all, if the U.S economy sneezes, it wont be long before India and China catch the cold and God forbid, a flu.
As of now opinion amongst analysts is divided. From Mark Faber to George Soros, every ones sitting on the fence and watching the horizon carefully. Its a bit like sitting in a boat, before deciding to venture in the ocean or pull out of the voyage, watching for the first signs of an impending disastrous storm. Except that, in this case, almost everyone is doing the same and there are very few who are brave enough to have left the shores. Hope this article, published in the Wall Street Journal helps you make up your mind, which way the winds are blowing. It paints a very mixed picture though, and I am not sure it will give you any definitive answers.
Labels: BizNpersonalfinance
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