Stocks logged their worst day in a month on Monday as a key manufacturing gauge came in weaker than expected and the dollar made a comeback.The NY Empire Manufacturing Index fell in May, indicating difficult times in the sector and presenting a headwind for economic growth. In the meantime, Treasury Secretary Timothy Geithner said the financial system was beginning to thaw but that the economic recovery would be slower than usual and that unemployment would likely continue to rise. Read and listen to what the experts had to say…
‘W-Shaped’ Recovery Likely
Stimulus isn't doing enough to stave off another economic dip, said Ron Insana of SAC Capital. He said the G8’s plan to roll back the stimulus is a bad idea. By letting the economy stand too soon, we can slide very easily back, especially when banks are still in trouble and credit card defaults and delinquencies are still rising. He predicted a W-shaped recovery.
Counterpoint: Recovery Won’t Be W Or V
The rebound will not dip down again in a “W-shape,” but at the same time it won’t exactly be a “V-shaped” turnaround either, said John Hermann of Hermann Forecasting. The consumer is more resilient than expected and the stimulus will offset the possible economic slump, he said.
Dollar Not Linked to Downslide
Michael Farr of Farr, Miller & Washington said the downward market movements are unrelated to the dollar. “We’ve seen markets go up for a long time and the pullback seems very reasonable,” he said. “The looming question is what are we going to do with this deficit? That is the fear that’s taking [interest] rates higher.”
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The Fed a ‘Reluctant Regulator’
Christian Weller of the Center for American Progress said the proposed regulatory changes are “revolutionary,” but do not go far enough. He said he is concerned about the Fed’s role as it “has been a reluctant regulator.”
Markets Set for Another Pullback
The move to the upside over the last week or so has been caused more by a lack of selling pressure, said Dodge Dorland, CIO of Landor Capital Management. “If selling pressure comes back into the market, the demand for buying stocks now is rather weak relative to what it's been, and so we're setup for a pullback," he said.
Markets Are Still Contracting
The economy has averted a depression, but it is still shrinking and the stock market has got carried away with all these green shoot discussions, said Juerg Zingg of Q Investments. “There’s nothing like a rebound here — markets have taken too much optimism as a result we expect market correction,” he said.
Investors Too Nervous to do Anything
According to Barclays Wealth and The Economist Intelligence Unit's latest report, high net-worth investors across the globe say they are seeing significant investment opportunities in the current markets, but most are still too nervous to take the plunge.