4 Things That Matter In the Upcoming Economy
NEW YORK (TheStreet) -- After the past two weeks investors are legitimately left wondering what else could surprise us? Unfortunately, the answer remains: A great many factors.
As the economic environment struggles to deal with a host of structural issues, it remains vulnerable to disruptive shocks. So a volatile environment looks to be the dominant theme in the markets for the next few years.
|Federal Reserve Chairman Ben Bernanke and the Fed continue to matter in this ongoing fiscal crisis, but there's a limit to what monetary policy can do.|
Against this backdrop, attention should be drawn to the following:
- Structural issues matter: What progress is being made against structural issues in the U.S. and other global markets? Austerity is painful in the short term but will ultimately foster stronger and more stable growth. Developing a credible plan at the federal level is essential to provide confidence. Therefore, the next few months are extremely important.
- The Fed matters: Recent statements are clear indications of the Fed's willingness to support the recovery. There are limits to monetary policy, though, so investors and consumers shouldn't be tempted to view Fed actions as fundamentally altering the direction of the recovery.
- Europe matters: Europe should not be ignored by investors or policymakers. Effective resolution of fiscal and structural issues in key markets such as Spain and Italy are "must haves" for financial markets to return to a more normal environment.
- Consumer behavior matters: How are households dealing with the latest shocks to their balance sheets? Will we see further retrenchment? In the first half of the year we saw consumers pull back on spending in the face of numerous challenges. A modest bounce-back in consumer spending is essential if the recovery is going to gain momentum in the second half of the year.
The current economic cycle is all about structural issues, and the focus remains on understanding and anticipating how these issues are affecting short- and long-term economic and financial market conditions.I continue to forecast slow and hesitant growth, but resolution of the issues noted above is essential to support a healthier economic backdrop. >To submit a news tip, email: firstname.lastname@example.org.
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