Market Review: February 2009 Commentary

The Audacity Of Hope 

Certainly there was an amazing amount of hope being expressed by the average US citizen (and probably hundreds of millions in other countries), that the refreshment of the new regime will be enough to turn the tide of the deep ocean of recession, credit crunch and wildly increasing unemployment.

In New Zealand, we have a double dose of refreshment, of course, with our own new Government as well, although I don’t quite see the same sort of hope being expressed here.  Then again, New Zealanders are far too practical to jump on a bandwagon based predominantly on emotional expectation (except when supporting the Blues/Chiefs/Hurricanes/Warriors).

President Obama has certainly assembled a very good team of economic advisers.  They have a great deal of experience, a fantastic understanding of market and economic forces and, seemingly, a commitment to aggressively solve the problems.  The difficulty is that the problems seem to be getting much worse as time goes on.  While the stimulus packages announced so far should be sufficient to stabilise the system and prevent major collapse, there is still not enough in them to supply much growth impetus.  These stimuli have provided a lot of hope so far, but I fear what a possible reaction will be (by the markets) once there is a realisation that they simply won’t be enough.  We probably saw a bit of this reality occurring in the sharemarkets in January, with the worst January ever for the US market and the worst inauguration day returns, despite all that expectant fervour in Washington and beyond.