There´s no good new for equities markets ahead. The US economy is just in a slowdown phase, but housing is in a double dip. Wall Street may continue with its losses for a 7th week on weak economic data and other troubling signs. Following S&P 500´s highs, it dipped 7%. This has triggered questions if the economy is on its way to a double-dip or is just experiencing a lull.
"I don´t necessarily think that the economy will go completely into a double dip. We are not there yet but the economy is going to struggle," Ken Polcari, managing director at ICAP Equities, says. "The economy has, in fact, to find it´s own way. The Fed has to pull out, you cannot have the federal government artificially stimulating the market while meanwhile the economy is not recovering. It gives a false sense. The market is up, so you think the economy is doing fine, when in fact is not."
Polcari points out that we already had a 6 per cent correction since April highs. "The market and investors are realigning themselves to what this new normal might look like post QE2," he explains. "There is some sense and some fear that is not going to be good. I don?t necessarily think that the market is going to crash but for one I don?t see the markets making new highs again and I think we are going to struggle through the fall," the trader points out.
Main concerns at the NYSE floor not only come from US economy but from problems abroad. The Sovereign debt in Europe has not gone away, in Asia there´s a huge inflation pressure and here in the US we are stuck in a no growth environment.
For Polcari, the QE2 is not nearly as successful as we thought it was going to be, and that can be true in a number of levels. He also thinks that it would be hard for the Government and the Fed to push through another QE3 program when people think the last one didn´t worked. About commodities, Polcari says that Oil is at 100 dollars a barrel now and economy is going backwards, so ?if it goes to 130-140 we might say goodbye to any economic recovery?. "If it happens, it´s surely won?t be good for the economic recovery."
