The Shape of the Expected Recovery from the Great Recession

In this essay, the author

• Explains that the world embarked on a 12 month trek to rebuild the fiscal, monetary and economic infrastructures among the developed and developing world and much has yet to be done.
• Explains that the collapse of the market required an extraordinary level of support by the world's governments as the various central banks poured trillions of dollars into the financial system coupled with fiscal policy initiatives.
• Analyzes how the impact of asset support programs on the u.s. fed's balance sheet ballooned to the tune of $2.239 trillion.
• Explains that the u.s. aggregate chain weighted gdp fell from $13.391 trillion at the end of 2007 to $12.901 trillion as of june 2009. the recession ended in q2 as the economy finally began to grow.
• Explains that since mid-2007 corporate profits fell dramatically as the decline began before the official start of the recession. in 2008 corporations really felt the pinch, especially during q4.
• Explains how the dramatic fall-off in earnings coupled with the collapse in credit markets filtered its way through the employment sector as companies fired millions of people as they shut down production and shuttered divisions.
• Analyzes how the decline in the corporate sector led to the destruction of the consumer sector as unemployment soared to levels not seen since the early 80s. in november, home foreclosures rose 18.4% yoy to 306,627.
• Opines that while the events leading up to the housing led global financials crisis will be studied and analyzed for years to come, the question now turns to recovery.
• Explains that the shape of the expected recovery has been described in many ways.
• Opines that the economic recovery could stall in q3 & q4 as inventory restocking and monetary/fiscal stimulus begins to fade.
• Opines that economists and investors will be keenly focused on the prospects of whether the economy is showing signs of being self-supporting to where fiscal and monetary stimulus aid is replaced with a cycle of sustainable increases in production, income and spending growth.
• Concludes that most asset classes have made a remarkable recovery after the lehman bankruptcy. markets are discounting mechanisms where investors value assets today based on future economic activity.
• Opines that the u.s. high yield and investment grade market is too tight for this point in the cycle. corporate bond market performance will be heavily influenced by yield rather than capital appreciation.
• Explains that the presentation steps through select economic data points and corporate bond market stats which illustrates where the market has traveled in 2009 and where we expect things are going.