Has recession fat lady sung yet? Many saying, “Oh no”

The run up in stocks may be petering out and a small chorus of voices is saying it’s time to batten down the hatches. For them the market’s climb has been fueled solely on naïve hopes and Obama good will. The ongoing problems are many:

• foreclosures continue, now spreading into higher end properties
  
• credit remains tight for both consumers and businesses industrial production has suffered the biggest decline since the Depression
• S&P 500 profits are now down 90%
  
• the true state of the auto industry is finally beyond denial with GM’s bankruptcy a foregone conclusion
  
• small and medium banks are under increasing stress from the collapse of commercial real estate where they had much more exposure than in residential mortgages
  
• consumer spending will continue to be weak with many facing very uncertain short term economic prospects while others increase savings to compensate for the devastation of their retirement plans
  
• and the big question still unanswered is: Where is the recovery going to come from?

About the only (potentially) positive factor is the fact that most of the stimulus money has not yet been dispersed. This will certainly help but already voices are calling for another stimulus package on the assumption (voiced at the time it was passed) that this one is not big enough. Few think Congress has the stomach for yet more deficit spending, however. If more spending is needed, it is unlikely Congress would pass such a plan until so much economic damage was done that its necessity was beyond dispute. One exception may be passage of another extension of unemployment benefits as there will be hard statistics to support this (and they are unlikely to drop anytime soon.)

One further psychologically depressive factor will be the growing awareness that whatever this recession’s depth, its length it going to be truly unprecedented. The tipped over “L” rather than the “U” now seems to be the almost unavoidable graph shape for this downturn. The simple loss of a truly staggering amount of money around the world can’t be overcome quickly or easily. Regardless of the markets’ gyrations we still have a lot of drama ahead before the fat lady gets her moment.