Recession-Weary Investors May Be Jumping the Gun

Article excerpt


Voting with their portfolios, investors are viewing the glass as half full, and their risk appetite is increasing. Confidence among global investors rose for the sixth straight month in June to the highest level in a year, according to State Street Global Markets, the investment research and trading arm of Boston-based State Street. Notwithstanding worries about swelling budget deficits and the potential effects on future inflation of printing money, global investors are feeling confident, and they are buying more stocks.

That's too bad, says economist David Levy, Mt. Kisco, New York-based director of the Jerome Levy Forecasting Center, who is inclined to see the glass as half empty. The bull market is a mirage, he asserts. Deleveraging will take years to run its course, crimping corporate profits, he warns. Meanwhile, plenty of consumers are still losing their jobs, being turned down for mortgages and watching the value of their nest eggs decline, he says. At the same time, state and local governments are facing huge budget problems that will only be resolved through painful cuts in basic public services, he adds. …