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Pros Say: Don't Bet on 'V-Shaped' Recovery

Published: Friday, 22 May 2009 | 2:13 PM ET

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By: JeeYeon Park
CNBC News Associate

Stocks made another break higher on Friday as the dollar's drop spurred buying in multinational companies. Worries about a possible downgrade of the U.S.'s credit rating left the market on rocky ground ahead of the Memorial Day weekend — but it also sent the dollar to its lowest level this year, which encouraged some buying. Read and listen to what the experts had to say...

'V-Shaped' Recovery Unlikely

"We've had dollar weakness based on a bit of movement towards risk appetite and away from safe havens over the last month or so,” said Bob McKee of Independent Strategy. He said that the "V-shaped" recovery is unlikely and expects more bumps in the financial sector, credit markets and in the economy.

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Credit Crisis: A 'Tougher Slog'

The problem right now is not just the availability, but the standards for credit, said Jim Chanos of Kynikos Associates. “In every recovery that we’ve experienced, credit was pretty easily available coming right out of the cycle,” he said. But in this credit crisis, he said the credit crisis would be “a tougher slog to come out of.”

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No Depression, But Lots of Volatility

We’re not in a depression and we’re not even going to go there, but we’re going to see a lot of volatility, said Patricia Chadwick of Ravengate Partners. She also said there is a serious problem with the government “getting into every single piece of the corporate pie in the private capital system,” which will not be beneficial for corporate profits.

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Prepare for a Trading Range

It’s important for investors to remember that despite the rally, there are various economic factors that are going to pose challenges in the short term, said John Lynch of Evergreen Investments. He said although the stimulus plan will ultimately work, investors will need to be patient over the next few quarters. “We should be prepared for a trading range,” he said.

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The Dollar Dilemma

The dollar has been weak since 2002 and it’s still a concern, said David Malpass of Encima Global. Although the U.S. won’t “fall over the cliff,” he worries that Americans are "grinding down their living standards" due to the weakening dollar.

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Some Hope For Travel Industry?

Despite rising gasoline prices, more than 32 million people will travel 50 miles or more this Memorial Day weekend, up 1.5 percent from last year, according to Robert Darbelnet, CEO of AAA. “It’s a positive sign both in terms of increased traffic and an indication that consumers are willing to loosen their wallets,” he said. He also predicted that Labor Day and Fourth of July weekend travel will also be stronger than last year’s numbers.

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