Capital Markets Outlook - Third Quarter 2010 Highlights

Double dip recession or not – that is the major consideration for the investment market. If it happens, we would expect global equities to experience another drop in value. The consensus among investors is that a double dip will not develop as evidenced by the September rally in the stock markets.

The Fed appears less optimistic and has done an unusual policy about-face. In the spring, as the economic recovery was progressing well, the Fed was contemplating how to withdraw the massive stimulus that had propped up the economy and stabilized financialmarkets. In contrast, at the September 21st meeting, in response to the weakening recovery, the Fed stated it would “provide additional accommodation if needed to support economic recovery and return inflaion, over time, to levels consistent with its mandate.” Economists have assigned a high probability of a second buyback program, albeit smaller in scale, to begin before year-end.

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