Three Economic Indicators
Can you count on the recovery?
While a healthy economic recovery appears to be under way, there is considerable debate over whether it can be sustained. A look at the following areas can help you draw a conclusion:
- Inflation: So far, inflation remains low. Yet the real issue is inflation expectations. While it appears expectations remain under control, market sentiment could easily change quickly depending on what happens with the economy, banks and Fed policy.
- Budget deficits and interest rates: For now, long-term rates remain historically low, suggesting the U.S. Treasury is not having any difficulty in financing its massive debt. But market sentiment could change quickly, especially if it becomes apparent that the deficit is not going down.
- Banks: On one hand, risk spreads are quite low. This implies that financial market participants may be willing to acquire asset backed securities that are at the heart of the system’s ability to generate credit. On the other hand, bank lending remains stagnant; there is widespread fear of further foreclosures; and the commercial property market is still troubled.
Despite contrasting indicators, what you can count on is a shifted business landscape that may demand new strategies for tackling old and familiar challenges. Achieving aggressive growth goals without sacrificing efficiency and cost discipline. Learning to manage risk in an environment where anything can change at any time. Staying attuned to the compliance demands of a more complex regulatory environment.
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