Capital Markets Outlook - July 2010

Overview … By most accounts the “Great” recession has been over for close to one year. Unprecedented fiscal and monetary stimulus provided the financial confidence and liquidity to break the downward spiral of asset prices and economic activity. As the nascent domestic recovery has shifted to the inventory replacement phase, we are again reminded of the fragility of the global recovery by the market’s recent volatility in response to the worsening European Union sovereign debt crisis. The current market correction has at times retested the market lows for 2010 and broken through the levels established during the “Flash Crash” in early May. The litany of concerns include the slowing Chinese economy, impact of healthcare reform, pending financial regulatory reform, indictment of Goldman Sachs, local government and municipality balance sheets, impending tax hikes and the Gulf oil spill have all cast a shadow over the market and heightened fears of a “Double Dip” recession and a global deflationary environment. While the odds of a long-term chronic deflationary environment similar to Japan’s experience are of concern, we feel the economy will continue on its slow growth recovery pattern.

To read the entire Capital Markets Outlook, click here.