The thrust of government bailout efforts is to relieve some of this stress, and it appears that things are beginning to loosen up. Swap spreads are always the first to react to changes in systemic risk, so the rally today could be more confirmation that underlying conditions are starting to improve.
Could the rally really be as strong as the chart suggests? That sounds like a lot to hope for, but I don't think it's unreasonable to expect some dramatic improvements. To date this crisis has been mainly a financial market event, and it has only partially spilled over to the real economy. Big financial crises do not necessarily predict or foreordain economic depressions. And most importantly, equity valuations today appear to be extraordinarily depressed by fear that could be alleviated.
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