Given the current environment and efforts my bet is that there will be further drops but some sense of stability returning into markets. Maybe the worst panic has been shielded but an economic downturn is not over yet!! At least not for some market regions, let us remind ourselves that recent years have initiated some economies becoming more potent now than ever.
Yesterday (13th October) markets saw their White Monday of 2008. Over the weekend European leaders have finally agreed on coordinated rescue action, over $2 trillion were put on the line as off Monday in guarantees and emergency measures to save banks in Europe.
The current crisis prevention efforts have prevented the worst for now. Monday and today have seen good bullish price bursts. However rescue efforts create a number of deep problems. To name a couple,
- huge budget deficits, this will put a lot of strain on population and take time to heal.
- due to the current scare it is also clear markets will become over-regulated, this will criple free trade mechanics and it is difficult to say to what extent will negatively affect markets.
- even thought we are in a recession inflation risks are still very real, in the UK today reached 5.2% as opposed to government's target of 2%.
