CautiousInvestor

A Durable Recovery?

Along with green shoots, there is mounting evidence that the economic improvements noted across the globe are largely a result of coordinated global fiscal and monetary stimulus.

When the effects of these initiatives wear off and the dispensers of economic kool aid are broke or run-out of syringes, we will be facing the problems we have been dodging. Bank balance sheets are still plagued with toxic debt and there is very little by way of private demand.

With demand constrained by increased savings and structural unemployment, there is little to suggest there will be a rebound in corporate profitability when the outlook includes contined deleveraging, increased regulatory and tax burdens, lower growth and falling profit margins.

After inventory restocking and liquidity mopping-up, things could get worse very quickly.