Dollar And Risk Tied To Stress Tests, Fed Forecasts
WEDNESDAY, 15 APRIL 2009 21:47:12 GMT
Investor confidence in the US and across the globe remains in limbo. The market is waiting for an indisputable sign that growth and rates of return are nearing a turning point; but so far, the weight of recession and lingering financial troubles hasn’t let up.
Investor confidence in the US and across the globe remains in limbo. The market is waiting for an indisputable sign that growth and rates of return are nearing a turning point; but so far, the weight of recession and lingering financial troubles hasn’t let up. However, in the meantime, fear that further financial seizures are just around the corner (a high probability risk just six months ago) has encouraged capital to find its way back into the capital markets from risk-free assets like Treasuries and money market accounts. Looking ahead, there are a few major events that could alter the market’s perception of risk: more optimistic economic forecasts from policy makers and the outcome of the first quarter earnings season. Today, the Fed released its Beige Book with the usual grim assessments. But, this time around there were a few bright spots hinting to the inevitable recovery. Whereas, a return to growth may be a long ways off, the appraisal of business health is active and ongoing. Particular interest will be paid to the revenues of the large US banks - who have so far bested expectations and raised the outlook for the Fed’s ‘stress tests.’ |
A Closer Look At Financial And Consumer Conditions
Market operations and confidence continue to improve. Though demand for short-term Treasuries and relatively risk-free money market paper holds stubbornly to recent record highs, there has been clear interest in reinvesting into the more speculative areas of the financial markets. The more time that passes since the last credit market seizure, the more likely it is that the financial crisis has passed. There are still milestones to risk going forward. In the US, the government’s ‘stress tests’ loom. While this evaluation of health for the nation’s 19 largest banks will be backed by infusions of capital for those struggling, investors will nonetheless take it as a vote of confidence. |
The world’s largest economy has yet to mark the worst of its economic recession. Today, the Federal Reserve’s Beige Book painted a dreary (yet unsurprising) picture of activity. Among the highlights, from the economic paper used by FOMC members to determine monetary policy, was a “generally bleak” outlook for employment, warnings that manufacturing shrank nationwide, “weak” consumer spending and altogether signs that national growth was still contracting. However, there were also preliminary signs of improvement. Housing was showing a few signs of stability. More remarkable, the report said 5 of the nation’s 12 Fed districts’ reported contractions were easing. |
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